Yes, SEO does still work and will always work. Over the last few years with Google making large strides in their efforts to fight web spam with their Panda, Penguin, Hummingbird, Pigeon, Payday and many more updates which along with removing many a spamy website from top rankings additionally sank a number of better quality sites this question has occurred time and time again.
Many think that there is no point to optimize your website for the search engines, that no matter what you do Google will eventually penalize and sink your site if you even whisper the words search engine optimization. These rumors are unfortunate and untrue. Search engine optimization is still and always will be viable, because true search engine optimization stays within the guidelines published but he search engines, including Google.
Search engine optimization is simply making your website the best it can be for the search phrases relevant to your target market, it has nothing to do with exploiting holes in Google’s algorithm. Nothing to do with cheating or spamming the search engines, those are what are referred to as black hat SEO techniques. Black hat search engine optimization is doomed and it has always been doomed. Yes some have gained in the short term only to lose as soon as the search engines learn to detect their latest scam.
White hat SEO (search engine optimization) is not only acceptable to the search engines, they encourage it with online videos and tutorials to teach the correct and safe way to optimize the content of your website so it will rank highly in their search results. Google webmaster tools and Google Analytics have sections specifically for search engine optimization.