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I've played one game of Small World. I thoroughly enjoyed it, despite losing badly. For one, I had no game plan, and was sort of just trying things randomly. Is there an effective, yet basic, strategy I can use next time to at least play with a sense of purpose? At the risk of asking too many questions at once...
One thing I'm discovering about Small World (especially in games with smaller number of players) is that it's not inherently balanced - your opponents can easily snap up amazing race/ability combos for cheap, leaving you with much less attractive options, just by random virtue of the seating order.
As such, you simply have to play a competitive game. Don't just look at your race/ability combo in isolation: look at it also in terms of how much it can do to hamper the efforts of the player currently winning the game (or the player most likely to stop you from winning).
Barring special circumstances, you will generally have two races on the go at once: one Declined race in as defensible a position as possible, and one Active race doing things. The Active race has a lot of work to do: it needs to take lots of territory (to get points here and now); take defensible territory (to keep getting points while in decline); and also, crucially, mess with the opponents: oust them from defensible areas and force them to go into Decline at points that are disadvantageous to them.
In short, I'd agree with everything the other answers have said about this being a game about adapting to circumstances - Small World is nothing if not a game of taking advantage of opportunities as they arise - but I'd add that it's not a game you can play without reference to how well the other players are doing. If they have some good race/power combos going, then grab an aggressive race, get in there and do them over, as quickly as possible! Defensive powers and play is all very well, but save it for when you're obviously in the lead...
These are just some general suggestions:
Go for numbers early. When the map is still mostly empty, it seems like quantity of troops is slightly more valuable than quality. I'm willing to give up a coin or two on the first round to get a few more troops.
Don't be afraid to abandon all regions and relocate all your troops. Sometimes this is a very good thing to do.
Try to place troops on mountains before declining. They'll hold out a little longer there.
Decline early to get two races working for you.
So a simple strategy that may work reasonably well is to start with a race that has a high number of troops, deploy those into as many mountainous regions as possible, and then decline on turn two. So on turn three you will already have two races working for you. I'm not saying it's a great strategy, but it's not a bad place to start.
Beyond that you need to play off the powers you have. The powers and races you get make a big difference in what would be a good strategy and what would be a bad one.
In general...
Your first race should try to spread to mountains, say 3 mountains and 1-2 non-mountains, then go into decline.
A bit on mountains:
Mountains are valuable for in-decline races because they make it much less desirable for someone else to interfere.
For example, if an opponent has 4 troops to spare and already has a race in decline, she's better-off conquering 2 open non-mountain regions than conquering your single mountain region, even if you're winning. She closes the gap with you by 2 territories either way, but she gets more coins versus her peers if she leaves you alone.
Should I always spend coins to get a race with more troops?
No. Those are victory points! Spend them wisely and be eager to grab VPs that other folks put down. Most race/power tokens can be useful if used correctly. Just figure out how you get extra VPs with the combo and keep focused on that.
How do I know when to decline an active race?
The easiest way to know is when your previously declined race has been wiped out or has been reduced to 1-2 territories that look like they won't last long. I believe that you need to earn VPs from declined empires as often as you can. It is better to decline too early, than too late.
Is there a good VP target to earn per turn?
1 more than everyone else? :) Sorry, I can't give a definitive answer here as most of my Small World experience actually comes from the game's predecessor Vinci. Always try to get a few VP's per turn, this fits with my "Decline early and often" strategy. Then make the most of your big turns. Know who is your competition at any point and be sure to take a territory or two from them each turn if at all possible.
