Photo organization is one of those things where I think it's hard to nail down 'best practices' because there are lots of different needs (I organize my professional work somewhat differently than my personal work) and every person seems to have a variation that seems 'most correct' to them (perfectly valid). With that being said my overall goal was to have a system that required as few levels of folder structure as possible to fully sort as many of my photographs as possible. The last thing I wanted was to have to drill down through 4 (or 6... or 8(!)) folders in order actually get to my photographs. So here's what I ended up doing:

Professional Work:

I do both commercial and client-based work, bust what has seemed to work best for me is to organize everything based on the following hierarchy:

[Client Name] -> [Project Date - Project 'Short Title'] -> Photographs

I format the date as YYYY.MM.DD, so that the projects all sort in date order, but as often as not it's the 'short title' that I end up looking for because I tend to name my projects in my mind, whether they're a 'Wedding Shoot' or a 'Product Shoot,' or whatever.

Personal Work:

I name in a somewhat similar method to above, but instead of the top-level being the client, I use the year:

[YYYY] -> [Photoshoot Date - Photoshoot 'Short Title'] -> Photographs

Again, the 'short title' tends to be something memorable to me ('Hawaii plants', 'Park Photowalk,' whatever). I also do take the time to give a tag everything as I've found that I have a good enough memory that I'm able to recall with 'reasonable' accuracy the personal shoots that I've done over the last couple of years, but as the memory fades I find myself thinking things like 'what was that one shoot I did with the awesome looking cloud next to that building...' and at that point keyword searching becomes my best friend.

The other piece to the puzzle for me is in my culling procedures... This is what I use to trim down the photographs that either aren't that good, or that I'm probably never going to use (or miss!) if I delete them. That's a whole different topic, but if you're curious you can find more info over at "What's a good strategy for choosing what to keep."

Anyway, that's how I tackle the problem for my own collection (which is now approaching 250,000 personal images and 100,000 professional ones).