Google uses two main parts to the algorithm , the first is its text matching system whereby Google tries to find pages relevant to what the searcher has entered in the search box. The second and part of the algorithm is of course the Google patented Pagerank™ system.
Lets first discuss the text matching part of the algorithm.
Google gives a lot of "weight" to the title tag when searching for keywords. It is therefore vital to make sure your most important keywords or keyphrases appear within this tag. It gives best results if you've other words in your title tag too after your keywords, but try to remain under 35-40 characters.
Many of us know this already but Google does not use meta tags such as the keywords meta tag or the description meta tag. This is because the text within these tags can't be seen by visitors to a website. Therefore Google feels these tags will be abused by webmasters placing lots of unrelated words in them in order to get more visitors.
This lack of support for meta tags means that Google creates your description from the first few lines of text on your page. This in turn means that you've to have your keywords and phrases right at the top of your webpage, if Google finds them your page becomes more relevant, if however it doesn't find them the rest of your page has to work harder to become relevant.
Google considers keyword density in the body of a page for determining relevancy too, so make sure your keywords and phrases appear a couple of times throughout the whole page. Don't go overboard though, a density of 6-10% seems to work best.
It has been come in the picture that Google has recently been noticed to give a substantial amount of "weight" to words appearing between the various header tags. These are tags designed to help you split up sections of your page, so this approach by Google seems to make sense. The header tags go from the smallest to the biggest, the bigger the heading tag the more relevent your page will become for the words within it. It is for this reason that you should always try to have your most important words within these tags as often as possible throughout your page.
Other advice about making your page relevant would be to make as many keywords appear within bold tags as you can. In the past Google has been known to index text in alt image tags, whether they still do or not I don't know but it couldn't hurt to include keywords in these tags anyway.
One final tip on page relevancy is the point on having your keywords and phrases in links which point to your site. It's a good idea to have the linking text contain your keywords as Google even says itself in its description of its Pagerank technology that it analyzes pages that links come from.
How much keyword laden links matter is anyone's guess. It has been noticed a lot of sites which give the HTML code to visitors who want to exchange links do include keywords in the actual linking area. You should do this too on your links page, say something like "if you want to link to this site, please use the following code". The code would of course have your most important words in the actual link text and your less important words in the accompanying description of your site.

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