1. Google is depreciating pages/sites that are over-optimized for certain keywords or keyword combinations. It does this by looking up search terms in a dictionary of target keywords or keyword pairs that it has compiled. This dictionary is Top Secret, because if you knew what was in the dictionary, you could avoid these words in your optimization efforts.
2. If the search term or terms hit on a dictionary entry, the search results for that user's search are flagged. This means that before the results are delivered, the order of the links, or even the inclusion of links, are adjusted so as to penalize pages that have overoptimizated for those terms. Most likely the title, headlines, links and anchor text are examined. It's possible that external anchor text pointing to that page has also been pre-collected and is available for scanning, but this is much less likely. (Besides, external links are not something within your immediate control, so don't worry about it right now.)
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