What does Latent Semantic Indexing mean in SEO?

Latent Semantic Indexing (LSI) is a system employed by search engines to understand what keywords a page is about even if those keywords are not actually used.

For example: "Here at our surgery we see patients from 11am to 3pm. We care about your treatment and our medical practitioners are all fully qualified. We are easy to find on Queens Road just of the High Street in Anytown".

Who are "we"? From the context "We" = doctors.

Thus a search engine can understand that users searching for "doctors Anytown" might be interested in this page and so they can rank it accordingly.

This is one of the reasons why some websites rank for a keyword even if they do not use it, or use it rarely, and makes some who do SEO believe Keyword Density does not matter.

In truth Keyword Density does matter but it has to be carried out within the contexts of Latent Semantic Indexing and Semantically Related Words.

Some search engines use LSI site wide. So for example they understand the page on this website about Google Seed Sites is about Seed Sites within the context of SEO, not about searching on Google for sites about plant seeds!

How?

Because the rest of the site contains keywords that relate to SEO and no keywords relating to plant life or horticulture. If I were to suddenly add a page of content here with green fingered advice chances are it would simply confuse search engines and never rank anyway.