I have repeatedly found that my domainname.org.uk names rank more easily than my domain-name.co.uk names, all else being equal (in so far as it can be). Are Google favouring the org.uk extension or penalizing the hyphen? I suspect the latter.
Several times I've also experimented using domains with exactly the same keywords and extension, the only difference being that one domain had a hyphen and the other did not. I've launched the sites at the same time and with similar (not duplicate) content. So far, in every case the non hyphen domain has ranked more easily and quickly than the hyphenated version and has maintained it's superior ranking through time.
It's usually not just a subtle difference either. The non-hyphen version often remains near the top of page one for the exact key phrase search, while the hyphen version festers away on page 20 or worse. This is especially noticeable with .coms, but also applies to the .co.uks I've tried it with.
This is just my experience and I admit that many other factors could be playing a part. However other, much more expert developers than I, have seen very much the same thing, as discussed frequently on SEO sites like Seomoz.org, Webmasterworld.com etc
From all my testing and research it seems pretty conclusive to me that Google gives a lot of weight to exact match domains (with no added characters or extra words like cheap, online etc.). Also from my tests I would say that the "exact match" advantage does NOT apply to names with hyphens, except perhaps where they are a grammatically correct part of the keyword. Mostly people don't include hyphens in their searches, and so a hyphen in the domain name is classed as an extra character, destroying the exact match bonus.
In addition my testing shows that this exact match bonus only benefits the tld extensions .com, .net and .org (not info, tv etc.) and each countries own main cc tlds, in our case only .co.uk and org.uk (not me.uk). A lot of other people's experiences back this up, but, of course only Google truly know how all this works and just exactly how these things affect domain ranking.
I know for a long time Google was said to ignore dashes in domain names and treat them equally to the non-dashed version. It was thought they might even favour dashed names because they were easier for the algorithms to read.
Today's ever more sophisticated search engine technology means that this is no longer the case. Google can read domain names easily, without the need for hyphens. In my experience they now give a powerful advantage to unhyphenated exact match domains, using the top domain extensions, over all other domain name options (hyphenated versions, lesser extensions, extra "padding" words).
This favouritism for exact match keyword domains without hyphens, could be seen as an algorithm bug, giving unfair advantage to sites based on their exactly appropriate name, rather than their content. But imagine what a mess the search results would be without it. For many small, or local, companies if their company name didn't benefit from this exact match bonus their site would easily be swamped by all the business directory sites, which would dominate the search results for that business name. This is especially so given the high page rank these directory sites have, and the lack of SEO knowledge seen in many small businesses.
Also I think Google assume that if you own exactkeywords.com or .co.uk you are very likely to be an authority site for "exact keywords", whereas with a site operating on cheap-keywords-online.com this is less likely. For these reasons, amongst others, I don't think Google will be giving up this exact match bonus anytime soon!
This gives a strong reason for preferring exact match keyword terms (no hyphens or weird extensions) when choosing domain names. Developers will pay for the extra authority these names give and the 'exact match bonus' and so these domains naturally command much higher prices, than the hyphenated versions, or those with extra words.
Having said all that, I still think that a good exact match domain name is only one building brick on the road to constructing a well ranked popular site. Google don't count this factor at all unless the site is developed to some extent. For example exact match domains that are simply parked, don't usually appear in SEs at all. Also work in other areas (better content, obtaining large numbers of high quality incoming links etc.) can overcome any shortcomings, like a hyphen, in the name. For quickly developed niche mini-sites however exact match domains are king! (for now at least!)
Just my 2p as an amateur website developer.
