Optimization means to improve something to make it perfect,effective.optimization is a collection of methods and techniques to design and make use of engineering systems as perfectly as possible with respect to specific parameters.In Seo terms We are making our webiste perfect so that it could appear in the top SERPs.
In general term, Optimize is to make as perfect, effective, or functional as possible. (Or)
Finding an alternative with the most cost effective or highest achievable performance under the given constraints, by maximizing desired factors and minimizing undesired ones. In SEO terms, we do optimization in order rank our websites and optimize the keywords which are often searched or more relavant to the websites.
in my point of view optimization is, to make a proper analysis of a website with their keywords with tags. after optimizing make the website friendly with search engine with using so many seo tricks and techniques.