Whether they are advertising their own product or using something like Google AdWords to get other people to buy affiliate links, the "free" website is charging you screen real-estate instead of money for their web design services.
While I do a lot with SEO and have a 30-day course for Google Optimization, Google AdWords trumps SEO for one simple reason-if you can't buy traffic to your site, it's highly unlikely you'll be able to get free traffic either.
Be a little careful of that last category, though - many of those templates can be incredibly beautiful, but also totally illegal, especially if you've monetized your blog with Google AdWords or something else.
Keyword Ranking Analyzer - By joining the AdWords program from Google (even if you're not planning on making money with it) you can learn what search terms are the most common for your intended audience.
You can also use the tool to search your site and come up with the keywords that it thinks are relevant - and if none of those are very valuable to AdWords, you may want to rethink your content.