SevenCubed - 4:03 pm on Dec 8, 2012 (gmt 0)

I read that if I link 29 times with the keyword "watches" as anchor text I am penalized by google.

Yes. But it's not a penalty. It will just filter you down in results. We really need to rethink the over use of the term penalty. A penalty is something that happens when you do something wrong -- a 10 minute misconduct penalty for unsportsman-like conduct. It is a predefined timeline you are not going to escape from no matter how remorseful you are about what you did wrong. Whereas a lowering in results through filtering is really not that you did something wrong but that you are not doing something right. So, it's just a punishment imposed by an over-bearing parent that says "you can come out of your room when you understand what you did is wrong" That was how I punished my children when they were young. I left it up to them to realize their mistakes and extricate themselves. (Of course I'd quiz them when they tried to walk out 5 minutes later!).

DO NOT link your keyword on every page. But do use it in an appropriate natural balance and sometimes link descriptive text next to the keyword that is in the same sentence, preferably no more than 2 or 3 words away.

To borrow taberstruths example:
Shiny <a href="example.com">watches</a>, <a href="example.com">watch bands</a>, diamond watches, watch <a href="example.com">repair</a>, the <a href="example.com">most common</a> watches, watches that stand out -- and do leave many instances of the word unlinked -- no more than about 2 links per 750 words -- your results may vary. Just reread what you've written, if it feels forced and unnatural then it will also be interpreted as such by goog's new shiny beast.