Keyword density is the percent of words on a single webpagesimilar to a set of keywords.

For example, a page with 100% keyword density on the keywords "making money online" means a page with absolutely nothing else but "making money online,making money online,making money online,making money online,making money online,etc." on it.

Keyword Density is used by some search engines for their results but not all so you could consider this part of SEO. However, you can bet they've got other programs that detect spam pages like the 100% example I gave above.

Hope this helped