Robert_Charlton - 6:36 am on Oct 27, 2012 (gmt 0)

As I was checking the rankings on Google for my hobby site which is a two word keyword...

Not clear from your syntax when you say "my hobby site is a two word keyword", whether you're saying that your domain name is "bluewidget.tld". Is this the case? I'm confused exactly what the situation is, because you also say that "the keyword 'bluewidget' never appears on my site...."

The run-together string "bluewidget" is of course much less competitive than the two-word phrase "blue widget", so it would be a lot easier to rank higher for "bluewidget" than for the separated words. If your site is sending any kind of signal to Google that "bluewidget" is appropriate to your site, it is in fact likely that you'd rank higher for it.

So... please clarify what you mean by your site "is a two word keyword." How does that relate to your domain name?... to inbound links?... to file names?... etc?