You're building a website or updating an existing site and now it's time to think about adding in your blog. How should I do it so that I get the most SEO benefit? Do you have an existing 3rd party blog or do you want to start a new blog on your new website? Where should I add the blog on my new domain e.g. http://mydomain.com?
Google would prefer if you did not add the blog on a subdomain e.g. http://myblog.mydomain.com , and google would also prefer that you didn't have it as an external blog embedded in an <iframe> tag. Google will also not give your domain any seo benefit if you just link to it on a 3rd party blog site.
Google Prefers Your Blog To Be On Your Own Website
Google would like you to host it on your own domain at http://mydomain.com/myblog or http://mydomain.com/myblog.html . In this way Google can see that every blog article is on your own root domain e.g. http://mydomain.com/myblog/blog-article-no1.html and your domain will get full credit for the seo success of that page and content.
If you put the blog on a 3rd party website then every article you write benefits the blogging website's domain, and if you use an <iframe> tag to insert the blog into your website Google can see that code and will give you no SEO credit for your articles.
A subdomain e.g. http://myblog.mydomain.com will in a large way be treated as a separate domain from http://mydomain.com .... so installing a proper piece of blog software under your root domain e.g. http://mydomain.com is the only way to go.