Now I've just been reading a lot about keyword density because someone just emailed me a so called magic bullet for google! Anyway there are hundreds of theories regarding what your keyword density should be, ranging from 4% all the way up to 20% and some bizarre Ideas that density does not matter anymore.
We all know that if the word is not there, then you won't rank for it and if you add it too many times then google will think you're using Black Hat techniques, but there must be some happy medium. Well this chap just emailed 2.5% was the magic number! 2.5% of what though!, content + metatags + alt tags + image file names etc. Or of 2 keywords or 3 or even 4 keywords.
Some tools you can find online say 4% but in my experience it is much higher than this, although it does depend on competition. Not what your competition has, but the quantity vying for those keywords, more competition the higher the percentage. Rumours are still afoot that Google will attempt to once again target keyword stuffing as they still think it is a problem. Knowing how clever the chaps are at google I think that currently and in the future the way the algorithms will work will be much more sophisticated.
FUTURE FOR KEYWORD DENSITY
But currently I think Keyword density is a major factor. I'm currently experimenting and I'm quickly finding what won't work but it seems to be a very finely tuned balance. And the % do seem to change depending on content, number images and other add ons.
So basically I think the more you have going on in your website the more Google will forgive you for not having a high keyword density. As Google keeps saying it's rewarding good engaging content rather than just words.
UPDATE ON KEYWORD DENSITY
It's still a major factor. Remember that if you don't mention the word Google will not show you in it's search results for that word even if you have contributing words. Always mention your location
By Zach Mendelsohn