Matt Cutts, who fights spam at Google1, has commented on the number of words used in slugs:
Next question: what is excessive in the length of a keyword-rich URL? We have seen clients use keyword URLs that have 10 to 15 words strung together with hyphens; or blogs – we have seen them even longer there. A typical WordPress blog will use the title of the post as the post slug, unless you defined something different and you can just go on and on and on. Can you give any guidelines or recommendations in that regard?
Matt Cutts: Certainly. If you can make your title four- or five-words long – and it is pretty natural. If you have got a three, four or five words in your URL, that can be perfectly normal. As it gets a little longer, then it starts to look a little worse. Now, our algorithms typically will just weight those words less and just not give you as much credit.
The thing to be aware of is, ask yourself: “How does this look to a regular user?” – because if, at any time, somebody comes to your page or, maybe, a competitor does a search and finds 15 words all strung together like variants of the same word, then that does look like spam, and they often will send a spam report. Then somebody will go and check that out.
So, I would not make it a big habit of having tons and tons of words stuffed in there, because there are plenty of places on a page, where you can have relevant words and have them be helpful to users – and not have it come across as keyword stuffing.
Stephan Spencer: So, would something like 10 words be a bit much then?
Matt Cutts: It is a little abnormal. I know that when I hit something like that – even a blog post – with 10 words, I raise my eyebrows a little bit and, maybe, read with a little more skepticism. So, if just a regular savvy user has that sort of reaction, then you can imagine how that might look to some competitors and others.
URLs, and by extension slugs, are important for indexing, using a few actual words in them that also appear in the page will help with indexing, but overdoing it might prove counter productive. Keep in mind that you can, to a point, teach Google how to treat your URLs, through their Webmaster Tools.
Anecdotally I've noticed that the Google bot seems to really appreciate Sitemaps, a solid sitemap is perhaps a better investment of your time than worrying (too much) about the slugs.
Some further reading:
1 ...awesome job title: Head of webspam!