Search Engine Optimisation is a funny little world, there are people out there who will claim to get your website ranked #1 for absolutely any keyword provided you pay a hefty fee. Whilst this is probably true, the methods they use are not at all ethical nor recommended by anybody.
Well it's simple, most search engine ranking algorithms rate a page by both how many visits it gets, how many links it has incoming, and of course keywords that it finds on the page (and that are on those incoming links).
These so-called "black hat" SEO firms have a whole host of websites that generally contain up to hundreds of hidden links at the bottom, with specific keywords pointing to specific pages across all different websites. These possible spam websites are what builds your ranking, if the firm has around 500 websites that they can instantly spam your link on, that's 500 inbound links, which will give you a lot of traction for the keywords that the links provide.
In addition to this, when you click a link in a search engine, you never go straight to that page, you go via a click tracking URL first (this is normally transparent to the user). Some SEO firms use automated bots (or even pay to outsource around the world) to "click" these links, thus pretending that your website has more traffic than it actually does. Not only does this "help" the search engines, but it also provides you with more visitors when you look at your statistics.
Finally, meta tags would generally be added to a page, particularly the keywords tag, stuffed with the keywords that you have provided to the company. This can also get worse, and result in hidden <h*> tags found in your web page, just to stuff it with more keywords.
The problem is that these methods are risky and unethical. You are essentially cheating the system by doing what is described above.
The reason that they are specifically risky is that most search engines, particularly Google, will severely punish, and perhaps even blacklist your website, if it ever got reported or found out to be "cheating".
The question is not whether it's a problem specifically, but whether you're willing to risk your whole website by saving a few bucks and taking a quick ride to the top, that may not even pay off in the first place?
As mentioned above, algorithms are based on many different variables, all of which can be factored into your website in the correct way. What I didn't mention above is that most search engines (specifically Google and Bing) also rank quite lovingly based on content quality, general correctness of your page, and page loading times.
Note that by general correctness, I'm talking about the markup of your page. If it's a total mess, made in tables and badly-formed HTML4, don't expect your site to be taken too seriously. On the flip side, if your side is written in semantic HTML/XHTML, and the markup would actually make sense to a non-human (ie. your header tags are used correctly, paragraph elements, strong instead of b for 'strong' text, etc. etc.) then it's going to have much more traction when it comes to getting ranking.
Below are just a few small, quick and obvious tips to get your site ranked highly.
I am going to say it again, quality content and semantic markup are the 2 most important points here, as well as keeping your site up to date. You may have the best site in the world in 2006, which could be ranked #1 for every search term imaginable, however if you don't keep that site current with 2011's information / changes, it's soon going to go out of date. Sure, this is an extreme example but you see what I mean.