Well for one thing, for myself, I always pick a niche with little or no effective competition if I can. Or it might have competition, but I know I can do it better.
I wouldn't work on or with a site that I didn't think could be a clear authority in *something*. What would be the point? There are only ten spots on the first page (if that) and I'm not playing for #11 or below. There's only so much time in a day, and I'm not getting any younger. Can't afford to waste it.
Everything has a brand, and brands always get favored, whether they're products, services, or people. that's life. They don't HAVE to be BIG brands, either.
@planet13 - I noindex or block pagination, sessions ids, multiple paths to the same product, search results, things like privacy policies and affiliate disclosures, contact forms, urls with question marks in them, sort orders; I provide rewrites for www or non-www, trailing slashes, upper case/lower case anomalies, and some taxonomy pages. Tag pages general go, and I'm not averse to blocking category pages until I get around to properly outfitting them for the best user experience.