There are hundreds, if not thousands, of parameters that will define the search engine ranking of a website. This ranges from the classical layout of your website, with a correct semantic structure (h1, h2, h3 header tags, <b>, <strong> and <em> for emphasis, ...), to using proper alt & title tags for your images and hyperlinks. Even correct use of follow/no-follow on your links, URL formatting & structuring, incoming links, linkjuice, keyword-usage, title mark-up, ... etc all play a role in how your website will rank for certain keywords.
These are all widely discussed, and information can be found just around the corner if you're looking for it. But there's also the aspect of hosting in SEO, which isn't covered that much, at all.
And that's a shame, because the company that hosts your website has a larger influence on your ranking than you might believe, at first glance.
Search engines (Yahoo!, Google, MSN, ...) will use the IP address of your website's hosting to determine the physical location. This helps search engines in bringing better "localized" search results. Because, after all, when you're searching for a bakery on the search engine in your country (ie; www.google.co.uk if you're from the UK, www.google.nl if you're from the Netherlands), you would expect the results to be somewhere in your area. What good is a bakery in Germany, when you're from France? (no matter how good those muffins are ! )
This is something you should think about -- because what if you're an international bakery, that wants to target multiple countries? If the site is hosted in France, will searches performed in Germany have an equal chance of reaching your website?
To go even further, most search engines will use a combination of your TLD (top-level-domain, such as ".com", ".nl", ".co.uk", ...) and the location of your hosting to help determine your rightful ranking in the SERPs (Search Engine Result Pages).
Ideally, you would have to host your .FR website somewhere in France, your .co.uk site in the United Kingdom, ... This could become a very expensive maintenance, keeping all of your versions of the site up-to-date. Services such as Localized Hosting can help you with this -- by taking care of the synchronization between different countries for you, so you only have to keep 1 website updated -- the rest will follow.
Even backlinks, incoming links to a website or webpage, are analyzed according to their location. Backlinks created on websites that reside on the same IP address as your own site, are deemed less important.
A good attempt would be to create several different domains, place some content on it and have a lot of backlinks to your actual company website -- in order to "trick" the ranking of the site. This almost never works, and one of the reasons is because the IP address of each backlink is checked, to see if it originates from the same server as the destination of the link (your company website). If it does, it's most likely a counterfeight-backlink, and ignored. You can even get SEO penalties for this.
This does pose some difficulties for shared webhosting, as you might have legitimate backlinks from other companies -- but if they're hosted on the same server as yours they might not even be counted. Rumour has it that Google looks at backlinks only if they're not in the same Class C subnet.
Your neighborhood, or other sites hosted on the same server, can have their influence too. If your website tries to sell kids toys, but is located on the same server with nothing but porn-advertising websites, you could be SEO punished for operating in this "bad neighborhood", even if it isn't your fault. And what if that IP gets blocked by spam filters, because of those abusive websites?
Actually, when I look back at this -- hosting plays a bigger role than one would first imagine. Choose your hosting provider carefully, and make sure they have the brains to think along with you, and have a good reputation.
Some links you might want to check out:
There are probably even more factors in play here, so if you have any -- please share them.