Mahalo registered hundreds of domain names that are actual search queries to improve their search ranking. For example, when Mahalo discovered that people searched for "Car Repair" enough times, Mahalo registered "CarRepair.com" and ended up the first result in google search from that point onward, because google regards the domains that match the query very highly.
Then they repeated this for hundreds of other queries.
This is considered bad form because these shell websites are all indistinguishable in terms of substance, and duplicate content already offered by the main site.
This may be a naive view, but using the terms in the domain name as an attribute in measuring relevance (and rank) seems to have outlived its usefulness.
1. Domain names are not counted toward SEO. Links and quality content are what drives SEO. That is what you should really focus on.
2. Having more than one domain name doesn't help SEO--especially if they are all on the same group of servers. Google knows when one person owns all the same domain names and when they are all on the same servers. If you wanted to try and fool google you might be able to have 500 servers in 500 different locations running 500 different software profiles, etc. However, the amount of time to do that is greater than just making good content.
3. Putting keyword in a domain just makes it easier to remember. Which is worthwhile...
Jason - I think the data would beg to differ. Correlation of exact match domains and even of domains that simply include the keywords with high rankings on both Google and Bing are quite pronounced - http://www.seomoz.org/blog/google-vs-bing-correlation-analys... - particularly for algorithms that supposedly contain 200+ ranking elements.
I agree with Aaron that a keyword-rich domain can be a great asset and benefit from an SEO perspective, but I find it hard to believe that you approved/initiated this strategy without some knowledge of the SEO benefits and intention to reap the rewards. Either way, glad to see you helping to spread the concepts and success SEO can bring rather than bash it - that's certainly a welcome change :-)
I don't have any type of legal background, so don't feel qualified to speak to the legalities of employing trademarks in domain names.
What? domain names ARE counted toward SEO. I just ranked a month old site to the first page for "X service" where X is a fairly competitive keywords (~50k searches globally)
A friend of mine ranked "X tickets" to #5 in the UK, where X is a very competitive keyword (millions)
My site actually has content, ~80 pages, while his is just a template.
Then they repeated this for hundreds of other queries.
This is considered bad form because these shell websites are all indistinguishable in terms of substance, and duplicate content already offered by the main site.