Paid Search Engine Marketing, spending advertising dollars to appear in paid results against keywords and phrases is not SEO. These are two different arts, and practitioners that use the two interchangeably make me wary. The two are related as they both affect your overall search results, but the tactics of SEO and the tactics of SEM are only somewhat correlated.
Search Engines utilize algorithms to try to assess the relevance of a website and it's content to a search term, as well as trying to assess the trustworthiness, originality, and quality of the content being presented. Once upon a time this was a very simple set of almost transparent logic. Search engines looked at titles, looked for the keywords within content and meta-tags, and looked (rather superficially) at things like the number of links leading to a site or page. These were simpler days, and this was when search engines were relatively easy to game. If you repeated your keywords often enough, there you were in search results. Internet marketers would stuff keywords into articles and metatags, build vast numbers of backlinks through directories and link exchanges, and use a host of low value techniques to climb up the search engine results.
Today the algorithms that drive search rankings are remarkably sophisticated. They are artificial intelligence, designed and refined to evaluate a website in qualitative ways that would amaze you. Read this blog entry from Google's Webmaster Central from shortly after the Panda algorithm was first rolled out in 2011. It describes what google is trying to achieve through their application of their algorithms. It includes trying to identify quality and originality of content, editorial quality control, objectivity, comprehensiveness, the site's authoritativeness and trustworthiness. If this doesn't set the bar high enough, after the continued application and updating of Panda and Penguin, there is now substantial additional weighting applied to qualitative and even aesthetic factors. Presence, frequency and placement of advertisements, use of visually unappealing colors and layout are all evaluated to help or hurt your search results.
Of course there are all the necessary off-domain or 'off-page' tactics that are important too. Read more in this post about "Off-Page SEO," why it's so important, and why the wrong SEO can ruin your website, even your business. Off-Page Search Optimization is (among other things) about cultivating relationships with others online. When other authoritative online sites point links to your content, it reflects your online authority to the Search Engines.
The bar is set high. It is still very easy to fail at optimizing your site if you don't understand the best practices of SEO. It is however no longer as easy to cheat the system. Google's sophistication and leadership in the search space have changed how SEO works. In order to place really well in search results (for relevant and valuable keywords and terms) it requires having a content marketing strategy. Achieving high search rankings and making those rankings sustainable requires a high quality site, attention to detail, and the consistent application of good marketing practices.
Search Engine Optimization is giving way to Content Marketing Optimization. Search optimization has become more of a tactical function inside of a larger strategy that must consider and address your marketing goals on a content level. The sea change is beginning to occur now, those that do not act quickly will find themselves behind the curve.
If someone tries to sell you an SEO strategy that sounds like it comes in a bottle, you might as well save your money to give to someone selling snake-oil or a genie in a bottle. They'll all likely have about the same impact on your Search rankings.