Does keywords help in driving more traffic to blog and increase the earning?

If yes then how?
or how one should select his/her blog's content inorder to target traffic which will get higher CTR's?
does keyword really help in this?

 

Well, it is a balancing act I suppose. Some keywords certainly generate more money per click than others. However, if you are writing a blog just for the expensive keywords and the content suffers because of it, you'll likely be missing the other side of the equations, which is traffic.

Personally, I'd rather write about quality content that I'm interested in with thousands of low-paying clicks than so-so content that I don't care that much about that happen to generate $1+ per click.

I'd recommend writing about something you know very well, and if you can squeeze in some higher paying keywords then so much the better...but if not, you can always work on doubling the amount of clicks you get on the less expensive words!

EDIT: On re-reading your question, I think maybe you were actually referring to how the choice of keyword affects placement in search engines? In that case I would imagine that the more popular the keyword, the more people there would be looking for it...but the harder it would be to beat out the competition for a top ranked spot on Google or Yahoo.

 

You can generate much more traffic using different phrases with same meaning.

One of most important things to drive traffic is keyword booleaning. If you check your web stats, use raw data readers for that, you will find that numerous visitors have specific needs in search.

Like: graphic adapter, graphic card, video card, video device, agp adapter for video, agp video.. Can drive "graphic agp adpater for video" etc..