look at competitor keywords, use keyword suggestion tool in adwords and the traffic estimator to find out how much those clicks are really worth. There are also a load of keyword tools out there - just google them
I often read this, but its something ive not done yet, do you find it genuinely useful? I know its not a good idea to copy what they are doing, but for ideas im guessing?
usually the keyword tool ideas work well - add some more to them and experiment. finally the list of keywords you bid on after a bit of experimentation should be the ones who have the least cost per acquisition.. i.e. if it takes you x clicks to get y customer acquisitions then cost per acquisition = (100*cost per click)/y. the keyword this is the lowest for is the one you should channel your max budget towards