What do you know about SEO?

I've been reading up on search engine optimization, not from a weblog perspective but from a professional discipline perspective. I am well practiced yet unstudied on the topic (i.e., I don't know what others say on SEO--especially search engine folks). And frankly, I am trying to define how much SEO is a game or a technique, how much a nicety or a necessity. Is it using key words in key places without sacrificing meaning or intention in order to have your website noticed when search engines crawl? This is what I do. And do search engines appreciate it or do they try to dismiss sites who weave these techniques into copy? I fear so, hope not.

I know there is an art to optimizing website content so that it is finely tuned and appealing to search engines without 1) sounding stilted and 2) so obviously catering to search engines that they can toss you out for trying too hard. I do some of this naturally in developing content. Should we all be doing more of it for our clients?

Ladies, gentlemen, I need to know what you know about SEO. Then I'll research some more. Then I'll say what I think. What do you think?