Understanding the Keyword jargon

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Explained: CPC or Cost Per Click refers to the maximum amount of money that an advertiser is willing to pay per click on their ads.
Importance: Higher CPC means higher EPC (Earnings Per Click) for you.
Source: Google Adwords

CPM Clicks per month

Explained:  These are the number of clicks the highest ad gets in a month in Google Adwords System.
Importance: There are many industries that exist online that don't get much clicks on their ads. Targeting such keywords might be harmful for your Adsense income. More are the number of clicks, more effective a keyword is for adsense. More clicks a keyword attracts, higher CTR you can expect for that keyword.
Source: Google Adwords

Advertisers

Explained: These are the number of Advertisers bidding on the keyword. This is the most important figure that you need while choosing keywords for Adsense.
Importance: There are many keywords in Google Adwords system that have high CPC ( $50) but no advertisers bidding on them. Obviously, no one is going to pay you $50 if there are no advertisers bidding on a keyword. Also, more the number of advertisers, the more Affiliate programs you can find in that industry.
Source: Google Adwords

Average CPC

Explained: Average CPC is the average of what all the advertisers bidding for the given keyword.
Importance: Average CPC adds to your power of judging high paying keywords.
Source: Google Adwords

Competition

Explained: The actual number of pages that will be competing against you on a keyword. Inanchor Intitle formula used to determine this figure is regarded as the most precise formula ever devised to measure competition.
Importance: This lets you find many more niche keywords. Generally the number of search results returned by Search Engines are taken as the number of pages competing on a keyword. But those pages who have used or just dumped your keyword in the corner of their page are not competing against you but SE will still list them. A true competitor targeting a webpage with a certain keyword, tends to include that keyword in the title and the anchor text that links to that webpage. And these are exact number of pages that are using these keywords in their Title text and Anchor Text.
Source: Google

Google Traffic Estimates

Explained: This is the estimated traffic that a given keyword is getting on Google Search Engine.
Importance: This data is far more accurate than Overture Search Estimates or WordTracker Search Estimates. More the number of searches, more profitable a keyword is.
Source: Google and others

Overture Traffic Estimates

Explained: This refers to the number of searches done in a month for a particular keyword, according to the Overture PPC Engine. This helps you determine the keywords that attract more traffic. But Overture is overworked and under staffed so often does not work or at best constant time outs.
Importance: More traffic means more profits.
Source: Overture

R/S Ratio

Explained: It is a ratio of Competition to Traffic. It’s an indicator of niche keywords.
Importance:Lesser the R/S Ratio, better will be the keyword is for building traffic. This formula again uses Inanchor Intitle formula to determine the competition which adds to its precision.
Source: Google and others

KEI Analysis

Explained: Keyword Effectiveness Index. It indicates the niche keywords too but is regarded better than R/S ratio. Try to the target keywords with high KEI
Importance: This figure also depends upon Inanchor Intitle formula for competition, which makes it more precise.
Source: Google and others

Rule of Thumb

If building a small extremely niche market site, then look for keyphrases where the 'sponsors' and 'competition' are nearly equal. Ex: 'pompano beach condominiums' had over 1800 hits last month.  33 sponsors and only 16 competitors.  That's fantastic news.  Firstly you are only competing against 16 other sites (instead of thousands or millions), which means you should get your page high up on the search engines, possibly top position.  Secondly, the sponsors are desperate to advertise and exhaust their allocated spend budget, therefore they pay considerably more than 5cents a click.  More like $5 last month! So building pages around these high value keywords would definitely be worthwhile.

If on the other hand, you are making larger sites with many tentacles to attract maximum ad clicks, then the Keyword Access database is a must.  For it not only contains millions of the popular keywords and keyphrases, it also contains all those with sponsors, even the extremely niche ones.  So you would also have pages like the one above.  A perfect balance for the larger site that maximises click through's and revenue by covering a wider slice of the niche market.