App Store keyword optimization is a difficult process as it is a constant tradeoff between targeting the most relevant and traffic heavy keywords that you can actually rank for. While the exact algorithm Apple uses to figure out what apps show up in what order is known only to the team within Apple that works on it, we do know the most important things.
And no, I'm not talking about how rankings can change minute to minute or how what you see inside the web iTunes store can be completely different from what users see on their device. I'm talking about the 100 character keyword field that along with the app name and company name are the only possible ways to drive real searches for your app.
There are three basic ways a user might find and download an app in the iTunes Store:
By searching for the exact app name and installing the app, either because they've used it before or the app was recommended to them by a friend or review site
By noticing the app on one of Apple's featured lists or browsing through category rankings and downloading it
By searching for keywords to find an app, either because they are interested in some specific category of things or because they have a problem (ie: "starcraft" or "flashlight")
Unfortunately there really aren't any easy ways to get ahead on the first two traffic sources, unless you've got a marketing budget in the tens of thousands of dollars and are willing to resort to some dubious marketing practices such as buying downloads. On the other hand, because of how the iTunes algorithm works optimizing your app for search traffic is a really powerful tool completely in control of developers.
The beautiful thing is that Apple completely trusts you to select your keywords yourself. Because of that, you have complete control over what keywords you're competing within.
For example, imagine an app developer making a racing game. If they were a web site, they would forever be buried underneath hundreds of other relevant results with higher Pagerank, so to stand out early on they might implement an SEO strategy which would involve competing for easier to rank for and lower search volume keywords, structuring their site around those terms. In the long run, they might be mildly successful but it would be difficult for them to tackle the more difficult and competitive keywords.
An app, on the other hand, could choose to select easier yet relevant keywords to put in the iTunes Connect keyword field. Instead of targeting the keyword "Racing" with a difficulty score of 6.8 and other high difficulty general keywords, they could target the keyword "circuit racing", difficulty score 2.4. Their app would have a much easier time ranking high in the app store for that search term, and as their app gains popularity and weight, they could swap out keywords to target higher traffic keywords.
There is a delicate balance that can be described as "biting off just as much as you can chew". When selecting keywords, keep in mind that ranking first on a less searched for keyword (that still gets a reasonable amount of traffic) is a lot better deal than being the app ranked #58 for "bird".
UPDATE: For more information on selecting the right keywords for your app, check out how our tools can show you which keywords to choose.