Keywords are the Queries for making search on the search engines by the visitors. Keywords might be one to sox word length with some exceptions. Your website must illustrate in search results for key phrases that show interest in your products/services and deliver some kind of benefit to the company (sign ups, purchases, downloads, etc), so it's important to find and test keywords.
Tools are available on net for doing Keyword researchs.These may be payable or free wares. Always we cannot say pay-per-use better than free ones. Google Keyword Tool,
Wordtracker,Keyword Discovery,Yahoo Search Marketing and SEO Book Keyword Research Tool are the most effective and free tools for making keyword researches.
The first stage of optimization is using local keywords for new web sites. We generally optimize our clients for their local city first and only then for more competitive keywords. This way clients see the power of search engine optimization, increase rankings reasonably quickly. SEO takes at least four to six months if you're going for the first page and start making profits on a local level. It's also less in amounts.After getting desired ranks, then only we go for optimize the competitive ones. It begins a link profile .It begins a level of trust from search engines. It tests effectiveness of keywords and search engine optimization for a particular business model.