Thanks brinked for a good summary. It is pretty much how I've approached SEO for the last 8 or 9 years (since Florida)
My main gripe is that over-optimisation is working for many people, it has forced a few good sites that I look after down in the rankings over the last year. Aggressive comment/blog/forum spamming and the buying of links has certainly been working in 2011/2012. I have seen one particular site ranking so highly with such a perfectly unnnatural link profile you just wouldn't believe it if you saw it!
I just hope Google gets these penalties working, I have seen some improvement with today's Panda tweaks, but I don't think it has gone far enough.