Do the Research - Before you jump into optimization you need to discover what "keyword phrases" people are actually searching for relative to your product and/or service.
A keyword phrase is the query that is typed into the search engine to find your products or services. The only way to know if people are searching for the terms you come up with is to do some analysis on those phrases. A good free keyword lookup tool is provided by SEO Book. It allows you to enter your keyword phrase and then does a look up on how many times that phrase was searched for in various search engines. Obviously, you should choose relative, high query phrases.
This link will open a new window with the lookup tool. Google Keyword Suggestion Tool: Use it and don't forget to bookmark it.

Do not bypass this step! Without the proper keyword research or market research, your campaign will be surely fail.

Develop Keyword Phrases - You will notice I didn't say keywords. The first rule of optimization is to develop only relative keyword phrases, not single words. You should concentrate on specific "Bread and Butter" keyword phrases or phrases that are very specific to your business.

Here's an example why:

Lets say you are in the financial industry, but more specifically your company sells financial analysis software. A search for the word "financial" on Google produced 33,900,000 results vs. 2790 for "financial analysis software" If you don't want to be buried in the 33+ million results, be specific! 

Another point to consider is keyword terminology. Use phrases that your users or the people you are trying to reach will use. They may not know your jargon and may not have any expertise in your industry. Therefore, it is best to ask some friends or acquaintances outside of the industry how they would search for your products or services. Test their suggestions in the keyword lookup tool. You may be surprised.

Develop a Description - In most cases, the description is what the world will see when they find your site in the directories and some search engines. The description is used in your "description meta tag" and you will also typically use this same description when submitting to directories like Yahoo, Business.com, DMOZ and others.

It's important to spend time and do a good job on your description. It must be carefully crafted to achieve the best results. You do NOT want a Directory editor to rewrite it for you!

Some description dos and don'ts follow:

DO

• Produce a concise, well written description of your business services in 25 words or less
• Write in complete sentences using proper grammar, punctuation and correct spelling
• Try and use your most important keyword phrases logically in your description (don't go crazy here)
• (different directories will limit you to character length. Typically 150 to 190. That includes spaces.)

DO NOT

• Do not use ALL CAPS in your description.
• Avoid capitalizing every word in a sentence.
• Don't repeat the title of your site in the description
• Avoid using promotional language and strings of key words and search terms. Words and phrases like "cool" and "best darn site" will be sure to get you a re-write or worse.
  

Write Good Copy - The text on your pages must be written logically and contain the same keywords that you determined are relevant to your industry. Be creative in adding the keyword phrases and keep in mind that it won't do you any good to cram them all on one page. A good strategy is to structure each page for a specific keyword phrase. If your site consists of 6 pages, optimize each page for a specific keyword phrase. If you have more phrases than pages, create additional relevant pages for those phrases if possible.
Ultimately, you want a keyword density of 3-8 for your target phrase. Use the keyword density tool at http://www.ranks.nl to determine if you have acheived this goal.
(Two keywords phrases per page max. Tip: Only use one for the best results)

Decide on page Titles - Page titles are very important to the search engines. Always put your best "bread and butter" or most relative keyword phrase in the title of your home page and sub pages. One phrase for each page works the best.

You should determine the best title to use from your research. Copy on the page should reflect the page title as well.

Create Meta Description and Meta Keywords - The meta tags are hidden HTML tags that express data about a given HTML document. The META element can be used to identify properties of a document. Each page should have unique meta descriptions and keyword tags.

Meta Description: You can typically use your description (mentioned above) as your Meta Description. It can be changed up for each page to reflect that product or service.

Meta Keyword: This tag is less important than it used to be but is still somewhat relevant so I still recommend it. Meta Keyword Phrases should be your most relevant keyword phrases for that particular page . Keyword phrases can be unique to each page or modified slightly depending on the page. A good example of keyword phrases structure follows.

engineering usa, engineering consultants, fitness for service, risk based inspection, api 579, failure analysis, pressure relief, litigation support, material selection, corrosion consulting

Note that they are lowercase and separated by a comma. Be specific, targeted and understand more is not better. Try not to repeat words and/or phrases more than three times.

Link Exchange - Top search engines now use "Link Popularity/Link analysis" in addition to your page content and optimization to determine ranking. This has become very important! This means the more "high relevancy sites" that have links pointing to you, the better your rankings will be. A "high relevancy" site would be any of the top directories such as Yahoo, DMOZ, etc. Also, Try to exchange links with other popular relevant sites in your industry. Contact the site webmaster and let them know why your link will be a valuable resource to their site. Also, offer a reciprocal link on your site. You may want to setup a "Resources" page for this.

Beware! Linking to low relevancy sites will not help you and may actually hurt your ranking. For instance, don't add your site to a "free for all" links page or get into any link popularity schemes or "Web Rings". The Search engines complex mathematical algorithms do know the difference and can consider this "spam". At the very least this is a waste of time and effort.

Update on Link Exchange: Most link exchange emails you receive are automated (spam) and should be closely scrutinized. We typically reject over 95% of the email request we receive. 

Be very careful who you link back to. A bad inbound link probably won't hurt your site but a reciprocal link to a penalized site can negatively affect your ranking. 
We are currently recommending directory inclusion to gain one way inbound links. A good list of directories can be found in the submission section

Directory Inclusion Program - Establish a directory inclusion program. Adding your site to some of these smaller directories can help boost your page rank and traffic. Inclusion cost typically range from free to around $100.00. I will list Directory recommendations in the "Submission" section. 

Also, try to find and submit to vertical portals or directories. (directories that are specific to your industry)

Update: Google has recently devalued the Pagerank of many directories and their subpage categories. They did this to try and stop link buying, an effort to curb the purchasing of links to increase Pagerank. However, it is still imperative to build links from high and medium PR directories.

PageRank - PageRank is specific to the Google search engine. PageRank is another complex algorithm so we'll just touch on the basics here. Essentially, Google looks at all the sites that are linked to you. If those site are high ranking, high traffic an high relevancy sites you will in turn get a higher page rank. If you link to lower page ranking sites at the other end of the spectrum, in turn your page ranking is lower and your position will therefore be lower in the rankings. This is a vague generalization and only one of many measurements and tests Google performs on your site, many of which are closely guarded secrets of Google! Learn more from Google.
To determine the PageRank of your site and the site you want to get a link from, get the Google Toolbar.