Visitors, during a search, use keywords and phrases to navigate the web. In order to attract that traffic you need in order to rank for those searches, you must be relevant to the search query, relevant to what the visitor is looking for and all of the signals your website send to a search engine must be relevant to the first two items.
In other words, the search engines should find your site to be relevant to the search and have enough relevance signals (as well as trust and authority factors) to rank well. Sure, you can rank for a keyword or phrase but if visitors landing on your site do not find what they are looking for, your wasting their time and yours.
With all of that said, you should rank well for keywords and phrases that have search volume. There are many tools out there, but creative use of the (free) Google Adwords keyword tool is as good as any place to start.
Your chosen keywords should be used in the following places:
Page titles, meta data headlines, content, fresh and updated content, link text, image or video file names, alt text, link title text and anchor text within links pointing to your website.
A seasoned SEO will be able to implement these keywords in such a manner as to not ‘keyword spam’ the search engines by staying within the bounds of SEO best-practices.
Repetitive over-use will be considered noise and we know that noise can interrupt your path to success as well as ruin the visitor experience.
There are other factors that play into the algorithm to determine relevance, but this overview is as good as any for anyone new to launching a website.