Keywords play such a crucial part in SEO that getting them wrong  increases your odds of being unsuccessful online. SEO would be a lot simpler if webmasters were taught how to properly select their keywords.
Let us start by describing the two basic types of keywords:
1. Generic keywords: This category generally includes one or two word keywords, which generically relate to the theme of your website. Examples of generic keywords are cars, used cars, computer games, xbox games etc.
2. Long-tail keywords: This category usually comprises of three or four word keywords, which specifically relate to your website. Because the keywords are long-tail, they fully describe your area of expertise, product or service and therefore increase relevancy in the search engines. Examples include buy Mustang 1967, Medieval 2: Total War review, Max Payne high quality wallpapers etc.
Now that you understand the difference between the two types of keywords, it is worth mentioning which keywords you should target for your SEO campaigns.
If you have a niche website (which I am sure most of you do), it is always a safe bet to start optimizing for the long-tail keywords in the beginning. Long-tail keywords provide traffic which is directly related to your product or service. For example, optimizing for Mustang 1967 edition will provide much more targeted traffic than optimizing for used cars.
Although most people know that they should optimize for long-tail keywords, they are put off by the fact that the traffic these keywords bring is minimal. When they compare long-tail keyword traffic with generic keyword traffic, they always seem to prefer generic keywords. The total amount of traffic should not matter to you. What should matter to you is what your conversion rate is.
The problem with generic keywords is that even if you do manage to rank at the top, most of the traffic to your website will not convert into sales. So even if you get tons of traffic to generic keywords, it does not provide you an edge from a business perspective.
I would suggest targeting long-tail keywords in the beginning of your SEO efforts and then move into more generic keywords. Once you rank high for long-tail keywords, you will surely get a considerable amount of visitors which will quickly convert, increasing your profit.
Make sure you do not start with generic keywords in your goal to get more traffic. This approach will cost you a lot in SEO and make it very difficult to get traffic that converts.
Always make sure you have done a thorough keyword research before you start your SEO campaigns. Selecting the right keywordsis the difference between making thousands of dollars and not making a dime.