Selecting the correct keywords is one of the most important jobs you need to do. Search engines all work differently but they all need to work out which web page is the most relevent for the users search term. They all aim to provide want they believe is the best page for the search term. One of the ways that they do this is to look for other sites that have links with that search term in the link. The more links with that term in it the higher you will rank.

A simple real world example.

You move into a new area and find that you need a plumber. You ask say five neighbours who they would recommend. If 3 out of the 5 recommend John then you are going to call John.

So if you are selling a widget you want as many links from other sites with the term widget in it as you can.  If the term widget is common then you are unlikely to get enough back links to beat the big boys, but you could get enough backlinks for “Cheap widget in hometown” or similiar.