Link text is the visible text inside a link. This text tells users and Google something about the page you're linking to. Links on your page may be internal—pointing to other pages on your site—or external—leading to content on other sites. In either of these cases, the better your anchor text is, the easier it is for users to navigate and for Google to understand what the page you're linking to is about.
QUOTE: “The easiest thing is think about what people are gonna type to want to find your site so we had somebody come to a conference and say I want to show up for (Keyword) and we said well have you put the (Keyword) on your page anywhere at all and he hadn’t and sometimes just very simple stuff like that really helps think about what users are gonna type to find your page and then just make sure those keywords are on the page.” Matt Cutts, Google 2013

When would this be useful? If your site has a blog with public commenting turned on, links within those comments could pass your reputation to pages that you may not be comfortable vouching for. Blog comment areas on pages are highly susceptible to comment spam. Nofollowing these user-added links ensures that you're not giving your page's hard-earned reputation to a spammy site.
You’ll likely compile a lot of keywords. How do you know which to tackle first? It could be a good idea to prioritize high-volume keywords that your competitors are not currently ranking for. On the flip side, you could also see which keywords from your list your competitors are already ranking for and prioritize those. The former is great when you want to take advantage of your competitors’ missed opportunities, while the latter is an aggressive strategy that sets you up to compete for keywords your competitors are already performing well for.

QUOTE: “So it’s not something where we’d say, if your website was previously affected, then it will always be affected. Or if it wasn’t previously affected, it will never be affected.… sometimes we do change the criteria…. category pages…. (I) wouldn’t see that as something where Panda would say, this looks bad.… Ask them the questions from the Panda blog post….. usability, you need to work on.“ John Mueller, Google.
One common scam is the creation of "shadow" domains that funnel users to a site by using deceptive redirects. These shadow domains often will be owned by the SEO who claims to be working on a client's behalf. However, if the relationship sours, the SEO may point the domain to a different site, or even to a competitor's domain. If that happens, the client has paid to develop a competing site owned entirely by the SEO.
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