Keywords are search terms an Internet user types into a search engine's browser to locate relevant websites and services -- the roadmap that brings customers to online businesses, hopefully - yours. Keyword choice and proper use is thus a major task for an SEO practitioner and often the first thing done in the course of an SEO project.
It's important to note that choosing the right keywords to present your enterprise is not just about optimization and is an essential part of your company's marketing and branding strategy. The words you choose to describe your business distinguish it among your competitors and shape how your customers perceive and remember you.
The SEO term 'keyword' is somewhat of a misnomer, as a single word would be too general and the search would return a barrage of sites of no use or relevance to the user; 'keyword phrases' would be more accurate because the search terms people use usually contain two or more words. So how do you come up with those precious word combinations? To produce an initial list, describe your services and products as specifically as possible, noticing both central concepts and applicable modifiers (for example, "book seller," "book store," "online book store," "used books store," "affordable books online," etc.) Adding a local name -- "Berkeley used books store" is always a good idea, both to modify the core term and ensure more targeted audience. To supplement the list, ask your customers or acquaintances which search terms they would use to find your website. In addition, try finding your competitors online, noting the keywords that bring most closely related results. SEO specialists also routinely find out what keywords the competition uses by viewing their source code (menu sequence "view" > "source").
A number of free and paid online tools, such as Wordtracker, can be used to estimate and compare the traffic volume of a given search term and thus narrow down the initial list to a manageable number of keyword phrases to target. Keyword selection can be tricky, and the key is to find just the right balance of keyword popularity and your chance to rank high on that keyword. Most internet users view only the first few pages of results, and often just the first page; more often than not, these coveted positions are occupied by well-established big businesses. Limiting your SEO efforts on a popular (and therefore highly competitive) word combination will thus dramatically reduce your chances of making it to the first page (forget the first position!) of SERPs, so even though your website will be in SERPs often, it is unlikely to bring much traffic. By contrast, longer-tail search terms enjoy lower competition and, more important, bring in more targeted visitor base, increasing conversion rate.
SEO specialists thus target more specific keywords and phrases along with more broad and popular ones. But the same caveat applies: if the keyword phrase is too specific, there will be fewer users using it. Strive for a golden mean - easier said than done, I know! - both in the specificity of your keyword phrases and in their number -- 5-10 keywords on average, though SEO experts vary in their opinion on the matter.
Now that you have your SEO keywords, it's time to put them to work promoting your website in search engine results ranks. SEO goal is the adequate use of keywords, both in the content of your pages and in HTML or Flash code of your website. If you notice that your web content is lacking in highly relevant keywords, you may want to rewrite it or add new text – context creation is an oft-used SEO strategy that increases the site’s search engine ranking as well as makes the site more appealing for users. Specifically, use keywords early on in the text - search engines afford more weight to the first two hundred words on a page. Similarly, make sure that your keywords are sufficiently used in the code, that is, in meta data (the title tag, that bold blue link users will click on in SERPs and meta description tag, shown in SERPs underneath the title tag), the page title, filenames, and if you're lucky - in the domain name (Google loves it when keywords match the website address). Also, don't forget the alt content of your images - many inexperienced webmasters leave them blank, but it is a prime spot for your keywords.
Final word of caution - don't overuse your keywords. This extreme SEO practice is called keyword-stuffing and is frowned upon by the search engines. Besides, keyword abuse results in a hard to read, boring, and unengaging context, which will not be appreciated by your visitors and will increase bounce rates. A good rule of thumb - make sure your context is user-friendly, relevant, and extensive - your visitors will stay longer and buy more, and the search engines will rank you higher. Good luck!