Not all Keywords are good for SEO as domain names, but some might be. These are called 'Exact Match Domains' (EMDs). They were thought to try to get a leg up on the Search Engine Results game, played out in Search Engine Optimization strategies. However, in early 2013 Google made changes to its search algorithm that caused many of these EMD's to loose their rankings as it was determined a majority of them were doing a tactic called keyword stuffing, which Google frowns upon.
What is a Keyword Rich or Exact Match Domain name?
If you sold blue widgets, you might register the domain names 'bluewidget.com', 'bluewidget-cityname.com', 'bluewidget.org', 'bluewidget-cityname.org', and so on and have them all point to one site. By using the name of a product, a description of the product / service and a city name to try to manipulate the search engines to placing your site at the top of the search results.
Can I buy an EMD and it work without penalty?
Yes, but really only in the case where you have a physical location established in that area, if you were to use the city name as well as the descriptive name. However it would be a good rule of thumb to be doing business as that name or have it as registered business name in that city.
In Summary
Buying domains that contain your keyword can SOMETIMES be useful in getting ranked higher in the search engines. Some search engines rank higher because of this and others do not. In fact, some search engines may penalize for this, like Google often will.
Final Word of advice
The subject of buying a misspelling of your domain name was thought as a safe bet, and an affordable one to help protect your brand, this is rarely the case and often people did this wrong. They would buy the misspelling and point it towards the actual domain name / website with a 301 redirect. It is a better strategy to build a strong brand that is recognizable so it stands out. However in the beginning, if you wish to help control the reputation, you could buy all the misspellings, but just leave them either as 'parked domains' or create a small web page with a fact about the company and that they have reached a misspelled domain name and then present them with a link to the real site.
It would be in your best interest to Consult a professional Search Engine Optimization company for more details.
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