a search for keyword1 keyword2 (with or without quotes) returns a number of pages that contain this terms SOMEWHERE on this site - it dosnt means all this sites try to rank for this keyword. i use inurl: or intitle: to get an idea how many pages really try to rank for this keyword.
[edited by: StarCoder at 8:00 pm (utc) on Jan. 31, 2008]
If you are just concerned about an accurate competition count then unless you search in quotes then you get sites that only have Keyword1 or Keyword2 but not necessarily both. Also there is semantics to consider (different words but similar in meaning) so putting words in quotes may not be accurate either.
"Blue widget" give a traff to your site jast as Blue wiget; Bue widget etc, if this a popular them like isurance. But this is not primary traff. Also, if you use all of this "keywords" (bluewidget; "blue widget"; blue wiget; etc), you have a good chance to be banned by Google like a doorway. Use only most relevant keywords and do not listen your colleague :)