Traffic from organic search is free and long-lasting, which makes you less dependent on advertising budgets. If you look at the list of the top three American e-commerce retailers, you will find that it matches the above data with the top three companies getting the most organic traffic. This definitely proves that SEO pays off in the long run: you attract quality traffic in large volumes without paying for it directly.
I just joined digg a few minutes ago. I gotta tell you that I have been researching on this topic for several months now. By far the best article I have come across on traffic generation. It's one of the most comprehensive ones I've read. And includes a variety of sources which never struck me before. I'm a musician and I plan on starting a blog and uploading videos soon. This is really going to help me a lot and I'm gonna follow. :) I really like the idea of using sites like wiki, about.com, scribd etc...
Google makes constant efforts to improve the search algorithm and detect quality content and that is why it rolled out the Google Panda 4.0 update.  What is this update really doing? It deranks low quality content and boosts the high quality one, according to Google’s idea of valuable content. In the screenshot below you can see what kind of content you shouldn’t be looking into if you are really determined in making a mess out of your organic traffic. 
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This section is particularly helpful when looking at organic results from search engines, since it will let you know which search queries resulted in engaged traffic. Below is another example from a site that focuses on electronic components. Overall, the Google organic source was well behind the site average, but some specific search queries were actually performing better than average.


James, you give a great template for how a business needs to move forward in their chosen niche online.  Quite informative and the meeting of minds has been something a number of us have done online and in person to gain better insight into our small similar businesses.  Thank you for sharing your detailed approach to increasing organic traffic...content still is king.
Beyond organic and direct traffic, you must understand the difference between all of your traffic sources and how traffic is classified. Most web analytics platforms, like Google Analytics, utilize an algorithm and flow chart based on the referring website or parameters set within the URL that determine the source of traffic. Here is a breakdown of all sources:
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