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It's about having keywords you want to target in the URL itself. For example, if you have an e-commerce site that sells used golf clubs, a good structure for your used golf club store might be:
golfclubcity/used-golf-clubs
Hyphens are better than underscores, because Google connects words separated with underscores, and interprets hyphens as spaces.
Bear in mind this is only one tiny aspect of good SEO strategy, and more weight is lent to content, quality links and social presence.
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