These days SEO is about much more than meta-tags, it encompasses web design for example, making sure your site is user and search engine friendly.
All kinds of lame answers. So hopefully my lame post won't stick too much
Anyway, SEO means that you do whatever methods will help you to have better results in search engines. You just need to have a strategy and know a way how to do it. For some small affiliate sites SEO strategy (that might be enough) could be submiting to free web directories, for some news/publishing site it could mean having a lot of content produced and for some corporate websites it could just mean optimizing titles, internal structure, internal links etc. So yes, doing SEO or even better "understanding" SEO is very important. Doing SEO doesn't mean creating backlinks on some spammy ways, it just means that you work on a strategy to get the max. from your website. Each website, each company has different goals, approach, way of thinking so strategies vary. The latest "SEO" advice I gave to my client was to add a forum to his site. It will help him make a lot of "on topic" content that will rank good. For another client my advice was to add a Facebook "like" button and make a buzz on social networks about their very entertaining online game for kids and that game will help them promote their products. So basically I would say SEO is actually way of thinking and not just throwing a bunch of backlinks.