What is this exactly?
Is this if I am from Germany that my original iTunes/Google Play game description is in German language?
Localization comes in a couple of forms. First is your app's localization. No doubt there are words or phrases your app displays when your players learn it. Many developers will give their users a chance to pick supported languages, for instance English, German, French, etc. through a settings screen, or they can detect the local language of the device and if it's a supported language automatically switch your text bits to the right language. This of course takes work on your part and other than being able to fetch the current locale information, there are no specific API's for managing this. Instead of fixed strings, you have a table of strings indexed by a key and a language and have your display.newText()'s fetch it's text from that a table. Graphics with words on them you would need for each supported language and have the file names like: "fr-playbutton.png", "en-playbutton.png", "de-playbutton.png" and then you would prepend the current language string to the file name so it would pick up one based on the language:
local playButton = display.newImageRect( language .. "-playbutton.png", 50, 25)
Then there is app store localization. Both Apple and Google (not sure about Amazon) give you the ability to provide much of the text that goes into the app store description in other languages. Also for things like In-App Purchases, Game Networking, etc. you can provide localized text for those strings as well.
2. App Store Optimization (ASO)
Are this basically keywords to use?
Should I use online tools that list most popular keywords, or just keywords that best describe my game?
ASO is basically that, it's how do you name your app, how do you write descriptions, pick categories and keywords that will help your app rank higher than similar apps when people search for you. It's a branch of SEO (Search Engine Optimization).
I'm far from an expert with ASO, but on an SEO perspective, Google will lower your ranking if you use irrelevant information. They work hard to make sure people can't "game" the system. And I know from personal experience that Apple scans your description before you submit it and flags things that look like they would lead to copyright things. For instance I built an app once that let people send pre-written text messages. The idea was that you could in a couple of taps let your wife know you're on the way home from work. But the real purpose was rapidly cast votes for American Idol. It shipped with all of their text numbers and "Vote" was one of the pre-set texts. Apple had no issues with the app, but when I mentioned in the description that you could use it to vote for American Idol, they flagged that text as not allowed. Now I can't confirm if they did it because it was a trademark issue or they were preventing my app from showing up in American Idol searches. The main point is Apple is at least looking for some things in their descriptions and won't let you use them.
You're best bet is to accurately describe your app. Put in as many keywords that are relevant to your app. But by all means read about ASO. Both Goggle Play and the App Store are heavily search driven and you need to do your best to get your apps to rank.