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Keywords

Try to include keywords in the first 100 words of a webpage as their presence is known to be correlated to search rankings.

The ranking ofmany keywords signifies internal quality. Google's recent “How Search Works” reports: “We look for sites that many users seem to value for similar queries.”

TF-IDF ('term-frequency—inverse document frequency') is a fancy way of saying: “How frequently does a word appear in a document?”. The more often a word appears on a page, the more likely the page is about that word. Google uses a sophisticated version of TF-IDF. Nevertheless, going overboard with keyword density, ie. keyword stuffing, can hurt SEO.

An “algorithm change” helped Google go beyond keywords. Thanks to Hummingbird, Google can now better understand the topic of a webpage.

Latent Semantic Indexing (LSI) keywords help search engines extract meaning from words that have more than one meaning (for example: Apple the computer company vs. Apple the fruit).Google may add diversity to a SERP for ambiguous keywords, such as “Ted”, “WWF” or “ruby”.The so-called “Bigfoot Update” supposedly added more domains to each SERP page.

The Payday Loan Update is a special algorithm designed tofilter out lower quality websites that were using a variety of spam techniques to boost their rankings for heavily trafficked search keyword queries like "payday loans," "Viagra," "casinos" and various pornographic terms.

Anyway, search results with curse words or adult content won't appear for people with Safe Search turned on.

Yes, Google does penalize people for over-optimizing their site. This includes keyword stuffing, header tag stuffing, excessive keyword decoration. It is also not wise to resort to cloaking by hiding keywords so that users don't see them, as that is considered a form of black-hat SEO.