I think Dan summed it up pretty good.
I wanted to comment on this though:
I know design is relative, everyone has different tastes...
I personally think it helps to get in the mindset that design is NOT subjective. Art may be subjective, a theme or the style of a given design could even be subjective. But design has rules. A design is created to achieve a specific goal or set of goals. If those rules aren't followed, a design is less likely to achieve those goals. Bad kerning (or keming) can turn click into dick, FLICKS into F%$*S and "The pen is broken" into "The pe^*s broken". Bad contrast can kill the visibility of the design. etc... etc...
Any part of the design that could be considered subjective, like the colors you use or the theme of the layout, is subjective to not your client but to your client's clients. Your client, who let's say owns a fast food BBQ restaurant, might say green is his favorite color, however the majority of people, when looking at a layout advertising food, tend to associate warm colors like red and orange, with BBQ flavored foods. Red white and blue means something different for us in the U.S. as it does for someone in let's say Brazil.
Your client may personally like a distressed grungy look, but if he or she owns a car wash that style of design says everything but "clean". So a designer needs to be aware of trends, and like Dan says make the customers target audience happy, not necessarily the customer. If you are worried about making a customer happy, keep this in mind: a good design will help that customer be successful, which will make them much happier than having their way with a font choice.
I guess what it all boils down to is experience. We do this for a living, they don't. We think, eat, drink design, they don't. At first it took a while for me to get the nerve to tell customers how it is, but I have found that most of the time it pays to point out who is more qualified to make design decisions. To help make that pill easier for them to swallow, I assure them that my goal is to help them do well, not to just get my way on something. It's not arrogance or ego that drives me. I have nothing to gain by just getting my way at the expense of their bushiness. However, if they are successful, I've established a strong professional relationship that will likely result in more work from them. Part of them already knows this. Why else would they hire you.
One thing I like to do is ask questions about their customers and the customers they hope to attract. I want to try to crawl inside their customer's head more so then the their head. I also ask questions about where they hope to take their business, and how they plan on using the logo in the near and distant future. This helps get the client and myself in the right mindset. One where we are discussing things where their knowledge maters, more so than what style lettering should I use.
That said, you will inevitably run into a few clients that won't listen to reason. I've come to the conclusion that they haven't hired me for my expertise, they want to hire me to act as the link between them and the computer or sketch pad. They want me to act as the mouse and keyboard operator. I honestly believe it is in their nature, and at a certain point you will lose money by fighting an unwinnable battle. I try my best to help them, but if my hands are tied, all I can do is help them create what they think will work and send them a bill.
it is hard, even with our fellow sign people to get that the design/logo/layout isn't for you, it is for who you want to sell to. we see all the time on the site people who love to surf putting a surfer on their layout for their van. we see colors, fonts and images that are personal favorites but do nothing to sell the business. it is hard amoung ourselves to get that accross to people. think about how many threads with logos or van layouts we have seen where the OP gets ticked off because people tell them it isn't a good idea. I think more of us need to develope and learn the purpose of a logo/sign design/ layout as it only makes it harder to explain to a customer why we could care less that their favorite color is blue and they love cats.
