1. Brainstorming - Thinking of what your customers/potential visitors would be likely to type in to search engines in an attempt to find the information/services your site offers (including alternate spellings, wordings, synonyms, etc).

2. Surveying Customers - Surveying past or potential customers is a great way to expand your keyword list to include as many terms and phrases as possible. It can also give you a good idea of what's likely to be the biggest traffic drivers and produce the highest conversion rates.

3. Applying Data from KW Research Tools - Several tools online (including Wordtracker & Overture - both described below) offer information about the number of times users perform specific searches. Using these tools can offer concrete data about trends in kw selection.

4. Term Selection - The next step is to create a matrix or chart that analyzes the terms you believe are valuable and compares traffic, relevancy and the likelihood of conversions for each. This will allow you to make the best informed decisions about which terms to target. SEOmoz's KW Difficulty Tool can also aid in choosing terms that will be achievable for the site.

5. Performance Testing and Analytics - After keyword selection and implementation of targeting, analytics programs (like Indextools and ClickTracks) that measure web traffic, activity and conversions can be used to further refine keyword selection.

Wordtracker & Overture

Currently, the two most popular sources of keyword data are Wordtracker, whose statistics come primarily from use of the meta-search engine Dogpile (which has ~1% of the share of searches performed online) and Overture (recently re-branded as Yahoo! Search Marketing), which offers data collected from searches performed on Yahoo!'s engine (with a 22-28% share). While neither's data is flawless or entirely accurate, both provide good methods for measuring comparative numbers. For example, while Overture and Wordtracker may disagree on numbers and say that "red bicycles" gets 240 vs. 380 searches per day (across all engines), both will generally indicate that this is a more popular term than "scarlet bicycles", "maroon bicycles" or even "blue bicycles."

In Wordtracker, which provides more detail but has a considerably smaller share of data, terms and phrases are separated by capitalization, plurality and word ordering. In the Overture tool, multiple search phrases are combined. For example, Wordtracker would independently show numbers for "car loans", "Car Loans", "car loan" and "cars Loan", whereas Overture would give a single number that encompasses all of these. The granularity of data can be more useful for analyzing searches that may result in unique results pages (plurals often do and different word orders almost always do), but capitalization is of less consequence as the search engines don't deliver different results based on capitalization.

Remember that Wordtracker and Overture are both useful tools for relative keyword data, but can be highly inaccurate when compared to the actual number of searches performed. In other words, use the tools to select which terms to target, but don't rely on them for predicting the amount of traffic you can achieve. If your goal is estimating traffic numbers, use programs like Google's Adwords and Yahoo! Search Marketing to test the number of impressions a particular term/phrase gets.