The idea is to place keywords strategically within your pages that match both the gestalt of your site and the terms users actually enter when searching for content like yours. The strategy is to choose keywords that best match the overall theme of your site, but yield few enough appropriate search results that you can achieve competitive rankings. These are your optimum keywords.
WordTracker's Secret Weapon
WordTracker's Keyword Effectiveness Index (KEI) can help you identify the keyword phrases that are most likely to succeed ( www.WordTracker.com ). The KEI is the ratio of the number of times a term appears in the WordTracker database (its popularity) versus the number of pages that target that phrase (the competition). A keyword phrase with a KEI of 100 is "good," while a KEI of 400 is " excellent "and more likely to be successfully targeted .
Although many developers perform SEO after they've created a site, the best approach is to research keywords and keyphrases beforehand, and build your site around them. The best time to employ optimized keywords is when you are choosing a domain name and organizing your site. If possible, enhance your keyword relevance by using a domain name that contains your top keyphrases. Pay special attention to top-level directories and files because search engines give these higher relevance.
Fredrick Marckini, founder of iProspect.com, says that most search engines rank the relevance of your site by using the following keyword factors: 
Prominence How high in your HTML and DOM hierarchy your top keywords appear ( title , h1 , etc.).
Frequency How often your keywords appear.
Weight or density The ratio of keywords to the total number words within a web page, or a section of a web page (that is, title tag density). Used to detect " stuffing " of keywords by search engines.
Proximity How close keywords are to each other.
Placement Where you put your keywords within your HTML shows their relative importance and can indicate what your page is about. Search engines favor the following areas for keyword placement:
The title tag
Heading tags ( h1 , h2 , and so on)
The keyword meta tag
The first 25 visible words
Hyperlinked text, URLs, and titles
Off-the-Page Criteria In some search engines, the way external sites refer to your page can be more important than what's inside your page:
Inbound Links Google, Teoma, and other search engines rank relevance in part based on the number and popularity of inbound links to your page. These "virtual votes " by other webmasters are a good way to improve relevancy.
Term Vectors A data-mining technique that converts inbound and outbound link characteristics and page terms into numbers representing points in space (vectors) and compares these numbers against an existing database of term vectors to classify pages according to subject and "theme." Focusing your page content on two or three keyword phrases can better define your theme, and thus raise your relevance.
Inbound Link Popularity
Here are two tips for building inbound links to your site: