SEO, stands for search engine optimization. If your web page is search-engine-optimized, it means the search engines are going to love it and are going to give it a higher ranking compared to non-optimized pages.
When you optimize a website, you not only write optimized keywords and content for that website, you also fine-tune the meta tags and insert the missing attributes. There are many tags the search engines use to evaluate how your website should fare.
As all the search engines rank you according to the quality of your content, so having good and relevant content on your website ensures decent search engine optimization. Also, keyword-density plays a very crucial part in SEO. This means if your web page has 100 words, 4 or 5 should be your keywords and it is also a sure-shot way of getting ahead of the other websites.