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Google appears to be favoring government, informational, portal, and content heavy websites. Many searches reveal results heavily favoring massive web properties, leaving very few spots for the little guy/gal.

The changes at Google have nothing to do with a penalty, it's an algorithm change. Over saturation of keyword phrases has always been bad, however, many were getting away with it before this update.

Its not a good idea to shove keywords into your copy wherever you have an extra spot. Keeping an acceptable level of keyword saturation is still important, but don't overdo it. The ultimate goal should be to write for your human visitors, NOT the search engine spiders.

Semantic markup and intra site linking are crucial steps to good placement. If your site is about widgets, you need to have links inside your body content that links to pages about widgets.

For example, on a page with a sentence that contains the phrase "widet employment" this needs to link to a page that specifically answers the question how does one employ widgets.

Getting good rankings for smaller websites is now relegated to niche terms. At the moment it is extremely difficult to get good placement for popular keyword phrases that are now dominated with results from amazon.com, shopping.com, ebay.com, bizrate.com etc.

Conclusion: Get specific with your pages and you will be seen.

My mantra: Whats good for people is good for search engines.