Lots of highly targetted keywords arranged properly into the right adgroups and campaigns supported by keyword rich, click worthy ads and optimised landing pages. That's what works.
A LOT of keywords has never really worked for me. It seems very hard to maintain a good CTR. I think it's mainly because you're using the same ad for all the keywords which isn't always what somebody is searching for. For example, if you bid on the keyword "Chevy Trucks" and your website and ad title is about "Chevy Truck Accessories" you may not be able to maintain a good CTR for that. Maybe a good enough CTR to maintain about $.50 a click but I wouldn't pay that much because the traffic isn't 100% targeted. But if you were bidding on "Chevy Truck Accessories" and had that title in your ad you would most likely be able to maintain a good CTR and would only pay about $.10 or $.15 a click.
This is where relevance comes in to play... No you cannot just create 50k keywords and just stick them in one large adgroup, this is not what we means. We mean 50k keywords properly organized into 20 campaigns, hundreds or even thousands of adgroups, with text ads written to reflect the keywords within the adgroups and the traffic sent to landing pages that contain information directly related to the search for term... This is proper account management, and this is why many individual, uninformed and lazy marketers fail at adwords and its the #1 reason why business hire professionals to do the work for them, because maintenance and optimization requires a lot of time, especially without tools for automation.
Work certainly increases with amount of keywords, but it can pay of if you are already investing a lot of money in Google Adwords.
100% relevant keywords and phrases is the best way. If you were searching for the term "dog collars" and you saw an ad with the title "Cheap Dog Food" would you click on it? Probably not. Even though it's related to what you're looking for it isn't really what you need at the time. That advertiser would probably maintain a good enough CTR to pay about $1.00 a click and probably wouldn't even break even on their returns. Unless they're trying to build a brand that probably isn't worth it.