Search engines send out 'crawlers' that automatically begin understanding your content - text, links, images and so on.. This helps them to decide where (and how) to rank your website.
They will look for repetition of, and to some extent the location of, keywords in your normal text to help them decipher what your website is about. They will use this information to then decide how well your site meets the search term a user has entered.
Remember, this is not the only factor the search engines use to decide how to rank you, but it's an important step.
Keyword stuffing is repeating your keywords many times on each page or in your META information. Avoid this as Google will consider this as ‘spamming’ activity and your rank will drop as a result of this.
Don’t try to ‘hide’ keywords on your page with techniques such as making the keyword text the same colour as the background. Google will still find it and it is considered ‘cloaking’ and you will be penalised in your ranking for it.
Too many different keywords
Try to keep your keywords few and specific, as trying to have too wide a range will dilute your efforts. If you like, you can improve your keywords later and replace them by tweaking your content.