First of all, you need to go to ClickBank to find a hot niche. Go to their marketplace and you will be able to find several products to get ideas from. Some good ideas are in the following niches: "gas", "going green", "dog training", and certain "work at home" products. My advice to you is to find about 3-5 products in ClickBank that aren't oversaturated yet, and then setup a credible website that reviews these products.
For keywords, go ignore what you heard about the inventory.overture.com and Google keyword tool links previously listed. Overture tool doesn't even exist anymore, and the Google keyword tool only chooses words that they want you to pick, and can lead to you spending money on stupid keywords that you don't need, and it will only deflate your PPC campaign. A good tool to start with is http://freekeywords.wordtracker.com/. They are free, but you can pay for one and get much more in depth results on keyword research.
To beat your competition, it's a little more complicated than just one paragraph. The most important things that I can tell you are the following:
1. get into a niche with little competiton (catch the "Wave" before it breaks)
2. differentiate yourself from your competiton (what do you offer that they don't)
3. make sure that you have identified a specific target market (maybe another market that your competitors can't / don't promote to)