Some say that placing a page more deeply will hurt it; personally, I think that's one of many issues, and should not be overestimated.

I'd have posed the question in a different way; it's not so much the appearance of the URL that matters, but the logic of it.

site.com/widgets/red-widgets/small-red-widgets.html is a useful URL; to visitors, to SEs, and to you. But it is wordy and cumbersome, and likely could be niftier:
site.com/widgets/red/small.html - for example

Logical, simple navigation helps everyone, and IMNSHO, makes it much more likely that your site will be effectively spidered.

Play around, find what suits you; logic trumps myth; do not rebuild the whole site in one go, whatever you decide.

Thanks for your input Quad – it’s given me a few more thoughts on how to go about it..

I am not sure if I have explained myself as well as I could in the above.
If each page would show a breadcrumb and had clear links letting you know which section you are in and where you can navigate.

Which in your opinion would be the better URL; for a better search engine ranking:
e.g.
1) widget.com/small.html (not showing any parents)
2) widget.com/red/small.html (without showing 'reds' parent.
3) widget.com/widgets/red/small.html

Bearing in mind there will be 1000 or so pages in the root and 50 in 'red' subcategory.
I am drifting towards 3 however if some of the subdirectories were to be long winded it could cause an extremely long URL.
Also some subdirectories go 4 levels deep – surely a page that was 4 subdirectories deep won’t rank as high as it would if it was on the root (e.g. 1)

I'd go for 2 or 3.

Even if there is a tiny advantage in having pages nearer the root, the site will be a navigational nightmare if every page is at the root. On the other hand, 3 or four levels is deep enough for the size of site you refer to.

There are over 100 factors involved in ranking, and I've seen no evidence to suggest that depth is any kind of priority (why would it be?). I'd concentrate on key items that do matter - content, design and navigability. They'll make sure you rank appropriately.

I'd be interested to see other views on this.

Don't confuse URLs with filepaths. It makes no difference where in the server directory-structure you place the files on the server, since you can use modules like mod_rewrite (Apache) or ISAPI Rewrite (IIS) to map any URL to any file in any directory. What matters most to search engines is not the length of the URL, but rather its click-depth -- how many clicks is the page in question from the high-ranking pages on your site? In other words, starting at your most "popular" pages, how hard is it to find the page in question by following links?>

Length of URLs *is* important if you get a lot of type-in traffic to deeper pages; If that's the case, then short URLs are easier to remember and easier to type correctly.

But a server's job is to translate URLs to filepaths and return the requested content -- A URL need have no similarities at all to the filepath on the server if your host allows you URL-rewriting capability.

Apache mod_rewrite example:

Requested (linked) URL: widget.com/small-red-widgets
Actual server filepath: /widgets/red/small.html

RewriteRule ^([^-]+)-([^-]+)-widgets$ /widgets/$2/$1.html [L]

This allows short, descriptive URLs at the same time as allowing you some freedom to organize your product pages into manageable directories on the server. Whether you wish to organize the files in this example by color or by size is your choice, and does not necessarily affect the URL.

Jim

What matters most to search engines is not the length of the URL, but rather its click-depth -- how many clicks is the page in question from the high-ranking pages on your site?

Jim Morgan took the words right out of my mouth. Directory structure and click depth don't necessary have anything to do with each other.

My preference would be A) - I like the idea of small, clean urls without many keywords.

I'd go with your preference of simplicity. From your next question, though, it looks like you may be having doubts...

Which in your opinion would be the better URL; for a better search engine ranking:
e.g.
1) widget.com/small.html (not showing any parents)
2) widget.com/red/small.html (without showing 'reds' parent.
3) widget.com/widgets/red/small.html

I feel that the ranking effects of keywords in the pathname is insignificant compared to the effects of anchor text in links to the page. If the page is likely to be linked to by its url, then the keywords in the pathname will in fact become anchor text... but truly, how many deep links do you see with a long pathname in the anchor? It's very rare, IMO.

If each page would show a breadcrumb and had clear links letting you know which section you are in and where you can navigate.

This comment makes me think that you may be planning to link to the same page via different breadcrumbs that have different pathnames. This is something you should avoid. Never have the same content on more than one url. On sites that need to do this for interface uniformity, you should have the breadcrumbs set by cookies, so the engines will only see one set of pages (ie, spiders don't eat cookies).