Here's what I do: I bought the long version (5.5 ft) of the Kryptonite "new york" chain lock (the one with the longer lock pin that looks like a small u-lock), after finding the short version (3.25 feet) somewhat too short to get through both wheels in most situations. The problem with the five foot chain is that (unless you have a sizeable midsection) it leaves a lot of chain dangling while you ride, so I had it shortened to about 4.25 feet at my LBS. Now there is just a bit of chain dangling and I can lock the ever-loving **** out of my bike.

I lock the bike in a figure eight through both wheels (and the frame, of course), making sure that each end of the figure 8 also goes through a stationary object. The lock pin goes through both ends of the chain and one of the center links. The downside of this is that it is hard to find a place where I can find two fixed objects close enough to one another to do this. That said, the upside is worth it: thieves would have to cut through the chain in two different places to free the bike, doubling the amount of time they have to spend out there on the street with an angle grinder. Once, I left my bike out in a questionable section of Brooklyn, as did my friends. We were at a party, and when returned mine was the only one left (and it isn't a beater).

A lot of bike thieves are perfectly happy to steal parts off your bike if they can't get the bike itself. You can discourage them from doing this by filling all of your hex bolts with superglue and compressed tin foil. You can also do it with lead solder, but that is a hell of a lot harder to get out of there when you need to service your bike. I can pick out the aluminum foil in about five minutes with a sharp barbeque skwer.