How do you gain #1 in a certain keyword?

I'm sounding retarded right now, but I'm seriously confused.

Backlinking is links from other websites that lead to your website.

Okay.

You have a backlink, which is in the article you wrote on another website. Right?

So, what about the keyword you chose for your niche? How would you actually rank in the keyword you chose?

Do you highlight a phrase as a backlink?

I mean if you had a website that had a keyword called "shoes and purses,"
would I a make "shoes and purses" a linking backlink?

I'm scratching my head on this one. Seriously. :scratchch?

<a href="http://yourlink.com">Your Keyword</a>

Thats called anchor text.
Your Keyword will be a link to http://yourlink.com
kinda like
Your Keyword

If you're seriously scratching your head on this one,have a look here for seo guides and google beginners seo guides as well.SEO is ,for the most part,backlinks.
I suggest you get a feel for the terms used,by all means buy up domains but don't build them until you fully understand what terms like keyword density,on site and on page seo mean and how much is the optimum amount.