I have a separate folder for each year.
In that folder I have a folder for each month. All the photos are sorted by date in that folder.

I also add a folder inside a month if there is an event on, for example in my August folder (inside a 2009 folder) I have all my pics sorted by date but I have a separate folder(inside the August folder) for DD's birthday & inside that, are 2 folders one for her birthday & one for her party as they were on different days.


I hope that makes sense