No, it doesn't hurt, at least not directly. The obvious downside is clearly the waste of time spent on something that is done naturally through your genuine writing. Now on the other hand, for all the other aspects of your optimization (beside the main content of your page), keyword density does play a role. Indeed people must be aware that not optimizing a site will get you unnoticed, however thanks to their new algorithm, one should not over-optimize if he or she doesn't want to be penalized.
Interested in what kind of keywords Google thinks your site is good for? Go to the Google Keyword Tool, click on the "Website content" radio button, enter your web address, and click "Get keyword ideas".Google will then go and check your site and give you the keywords it things your site is geared towards.
Keyword density is a ratio given as a percentage. You generally want your keyword density to be about 2%. That percentage is for each keyword or phrase, not for all the keywords you might have in that post.If your keyword density is too high it can appear to the search engines like you are spamming. You really don't want to go above 2.5% for your density.
To find the keyword density of an article or a page, you can divide the total number of words with total number of times a keyword is used in the topic. For example, in a 200 word articles if the keyword elephants appeared 20 times then the keyword density of the article will be 10%. But for keyword phrases, the formula can be tricky as the individual words in the phrase are counted and the whole phrase is not considered as a single term. So, if the term African elephants appear 20 times in a 200 word article then the keyword density is considered to be 20% rather than 10% by some search engines.
If you put too many keywords inside an article, you are in risk of over optimizing article and such practice is known as "keyword stuffing". Search engines don't like that concept as it interferes with the way they are calculating site rankings. Their spiders detect "stuffed keywords" in an article and penalize for it. As extreme measure your site will be blacklisted one or more search engines. Careful with that keywords Eugene.
Keyword density can have a powerful impact on your traffic. If you are able to provide actual relevant content to your target audience with meaningful keywords you will not only have people searching for your web page on Google but you will also have people that would like to link with your site and so forth. So by having good keyword density and relevant information your site has the potential to be ranked fairly high on the search engines.
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