This is what Google has to say on the subject of SEO:

Quality Guidelines - Basic principles:

Make pages for users, not for search engines. Don't deceive your users, or present different content to search engines than you display to users.

Avoid tricks intended to improve search engine rankings. A good rule of thumb is whether you'd feel comfortable explaining what you've done to a website that competes with you. Another useful test is to ask, "Does this help my users? Would I do this if search engines didn't exist?"

Don't participate in link schemes designed to increase your site's ranking or PageRank. In particular, avoid links to web spammers or "bad neighborhoods" on the web as your own ranking may be affected adversely by those links.

Don't use unauthorized computer programs to submit pages, check rankings, etc. Such programs consume computing resources and violate our terms of service. Google does not recommend the use of products such as WebPosition Gold that send automatic or programmatic queries to Google.

Quality Guidelines - Specific recommendations:

Avoid hidden text or hidden links.

Don't employ cloaking or sneaky redirects.

Don't send automated queries to Google.

Don't load pages with irrelevant words.

Don't create multiple pages, sub domains, or domains with substantially duplicate content.

Avoid "doorway" pages created just for search engines, or other "cookie cutter" approaches such as affiliate programs with little or no original content.

These quality guidelines cover the most common forms of deceptive or manipulative behavior, but Google may respond negatively to other misleading practices not listed here, (e.g. tricking users by registering misspellings of well-known websites). It's not safe to assume that just because a specific deceptive technique isn't included on this page, Google approves of it. Webmasters who spend their energies upholding the spirit of the basic principles listed above will provide a much better user experience and subsequently enjoy better ranking than those who spend their time looking for loopholes they can exploit.

The other major search engines have similar guidelines.