The first tenet of on-page optimization is building a website that people want to visit. The content, design, navigation & usability of the site should be as eye-catching, appealing and desirable as possible. This has little to do with the way a search engine's algorithm will judge your site and everything to do with how visitors will view your site once they visit. Beyond these common sense optimization techniques, there are many on-page factors that can help your site rank better in the search engines.

List of Factors in On-Page Optimization:

Page Title
Possibly the most important on-page factor for optimization. Your primary keyword phrase should be the first words in the title of the page. Remember that page titles are also displayed in the SERPs, so having a catchy and inventive page title helps to get more visitors from the search engines.

Meta Description Tag
Although the meta description tag is not used by all search engines, it is important to remember that search engines switch back and forth on the issue of accounting for the meta tags, so it is important to always have them active. The description tag should contain a careful, brief, well-written description of the page's contents. Try to write for a user, rather than a search engine, but make sure to use your primary keyword phrase at least once, and preferrably as the first words in the tag. A max of 255 characters is recommended.

Meta Keywords Tag
The meta keywords tag should contain your most important keyword phrases first, followed by common mis-spellings or mis-typings and synonyms of the phrase. Remember to comma separate phrases and keep the characters to 255 or less.

Additional Meta Tags
Several organizations have begun initiatives for the expansion of meta-data tags. The most well known of these is the Dublin Core Meta-Data Initiative, which attempts to use meta tags to make the Internet's web pages easier to catalogue. A list of other prominent meta-data types is available from Bauser.com. The impact of these additional meta tags on modern search engines is questionable, but these initiatives could grow to popular acceptance and thus use by the search engines.

First text on Page
Search engines typically regard the first 100-200 words on the page as the "most" important. Therefore, it's critical to begin your page with relevant subject text, rather than advertising or off-topic text.

H1, H2, H3 header text
The H tags are used to label certain text as a headline or sub-header on a page. Search engines interpret headline text as more important, so it's worthwhile to include your primary keyword phrase at least once in an H1, H2 or H3 tag.

Bold Text
Bolded text is also considered more important by the search engines. Bolding the primary keyword phrase 1-3 times on the page is a good way to alert the engines to the phrases prominence and importance. Bold text is also a good way to make text more 'scannable' by visitors seeking information on that specific keyword phrase.

Alt Tags
Image alt tags should contain a brief text description of the photo/image. It is worthwhile to make these alt texts contain the keyword phrase when applicable.

Images
Image names can pull in traffic through both image searches at the major search engines and contribute to the relevancy of a page. If you are dealing with a search phrase that could pull

Internal Link Structure
The structure, number, anchor text and formatting of the internal links (links between pages on the site) can sharply influence search engine rankings. It is recommended that internal anchor text is used with the format - one page, one keyword phrase. This means that linking to multiple pages with the same anchor text will dilute the relevancy of each. Stick to a single optimized page for each term.

External Link Structure
Carefullly constructing the outbound lnks on your site is also advantageous. Linking to bad sites/neighborhoods can penalize your website with the search engines, while quality, on-topic links can provide a significant boost. Popular SEO myth maintains that off-site linking is detrimental to PageRank and therefore to rankings, but this is completely false. Well-placed, on-topic links to other sites and pages is part of the web's natural structure and can help your site's rankings.
Additional On-Page/Site Factors

Hub Pages
For many web searches, particularly at Google, hub pages rank very well. A hub page is simply a page with a small amount of information on a subject that links out to many useful, valuable resources that relate to the topic. An example would be a search for wildlife preserves that brings up a search result page that links to many of the most popular, largest or best wildlife refuges & preserves around the world with some information on each. Hub pages typically contain on-topic keywords, phrases & short sentences, punctuated by a wealth of links to on-topic pages.

Authority Sites/pages
Authority sites are those that are often linked to by outside sites when referencing a particular topic. Becoming an authority site is exceptionally difficult and involves primarily off-page factors. However, some on-page techniques are critical as well. Make sure that your site's organization and link structure suggests to both users and search engines a particular page for each unique topic and doesn't dilute relevancy by suggesting multiple pages for a single topic/keyword phrase. You will also need a resource on the subject that is particularly worthwhile and exceeds the information/resources available on other sites on the web.

Topical Structure
A site's topical breakdown and categorical hierarchy can make a big difference in achieving rankings. When designing the information architecture of a site, keep in mind the directory tree-like structure of many popular web sites like DMOZ, Wikipedia, etc. These sites are perfectly formatted for SEO because of their rigid hierarchy and data structure. Attempt to emulate this type of category-build and your site will be optimized for search engines.

Keyword Density & Term Weight
Keyword density on the page can be an indicator of spam. Make sure you are careful about the level and frequency of use of keyword phrases. A good rule of thumb is not to exceed 5% density for any keyword phrase and to stay above 2% for any targeted phrase. Density has taken heat for being a poor metric in SEO. For those interested, term weight may be a better relative metric for use in SEO. A thread at SEW explains this in greater detail.