Keywords

Determining what keywords and phrases a site should target is best done at the design stage so they can be included in the internal linkage structure.

When choosing keywords and phrases it is important to discover the likely terms used by searchers rather than picking them by personal preference as the two rarely match.

You can do this both by studying the competition and using one or more of the keyword suggestion tools such as Keyword Tracker, Keyword Discovery, Overture and AdWords.
They all use different data sets so no single one stands out, here's a good forum thread from SEW that discusses them.

As for where and how keywords should be placed on a page, here's an old but still useful "ready reckoner" method from Brett Tabke of Webmasterworld, that assigns points to their appearance in the important areas of a page.

"What I do to determine what a pages keywords "really are", is a quick review that is now second nature. The way I pretty much approach it in my mind is to quantify the page and give it my own quick rank. I give it points based on where the keyword I am targeting exists on the page:

Inbound link text : 10 points.
Title: 10 points.
Domain name: 7 points.
H1-h2 headings: 5 points.
First sentence of first paragraph: 5 points.
Path or filename: 4 points.
Proximity (multi kws): 4 points.
Beginning of a sentence: 1.5 points.
Bold or italic text: 1 point.
Usage in text: 1 point.
Title attribute: 1 point.
Alt tag: .5 point.
Meta description: .5 point.
Meta keywords: .05 point.

Just score each word on the page under that minialgo and that is a good idea of what the search engine is going to see.
Then run it through a density checker and keep the density down under 10% for even the good keywords.
Once you get that "mini algo" in your brain, you will start to construct pages with it and won't give it a second thought."

For further reading on keywords I recommend: