What you need to do is put your keyword in quotes so that you only search web pages that are optimizing for that keyword on their site. This will make the number of competing pages drop dramatically. I usually shoot for keywords with less than 100,000 competing pages when I search for my keyword with quotes around it.
Next you want to do a search for how many pages are optimizing for your keyword in the title of their page as well. To do that type this into Google's search field. "allintitle:your keyword". By doing that you'll get a reading of how many web pages have your keyword in their title. I usually try to get keywords that have less than 20,000 competing pages with their keyword in the title.
After you've gotten past those two requirements for your keywords its time to check the top results for your keyword. If they're strong websites you'll want to avoid them and if they're weak you'll know you can rank well for that keyword. I recommend using the SEO for Firefox plugin by SEO Book to do my analysis of competing websites. This will allow you to see how many backlinks these sites have, what their PR is, how old they are and how many different sites are linking to them.
Mainly you want to look at how many backlinks there are to the page thats ranking. If its over 500 then you now have a target for how many backlinks you need to get. 500 can take a little while but its very doable. For me if find that my competing sites have 500 backlinks or less I get very excited and you should too. Thats a keyword you should be able to rank well for in 2-3 months.
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