I'll agree with Dave here. There's a reason O.co redirects to Overstock.com. Vanity URLs are excellent for radio, TV, and can be especially useful for per-per-click ads, since you can add more keywords into the display URL.
Google still highlights keywords in their search results that match the query, even in the URL. When a user sees their keywords in the title, description and URL, the trifecta result is greater relevancy. Greater relevancy may improve your click-through-rate (CTR), a major ranking signal in paid, natural, and local search results.
I'm also a fan of brand names versus keyword domains. MikesLawncare.com might actually be a better domain than lawnmowerserviceinlosangeles.com, as it is less spammy, used on business cards and shared via word of mouth with happy customers. Stick with the brand name and you can never go wrong (long term).