I've heard of 3 places you hold the normal drop-style road bike handle bars.

1) on the top, closer to the stem
2) "on the hoods" - this is where?
3) in the drops

I find when I ride I'm maybe 95% in the drops, the other 5% on the top. I've seen other cyclists on the road, and in books and whatnot, and it appears my ratio is a little off... and i shouldn't be in the drops nearly as much as i am. what is good/bad about being in the drops all the time (other than neck pain on longer rides)?

How do you ride it?

The little rubbery covering on your brake lever housing is called a hood. Holding the bar by gripping the levers' hoods is called 'on the hoods'.

I ride mostly in the drops as well. It's all a matter of preference. (Marco Pantani spent practically all of his time in the drops, which was considered pretty unusual for a dedicated climber.)

do whatever yo

Yah, the beauty of it is you can ride wherever is comfortable.

I like riding on the hoods as I find the position more ergonomic for my wrists. I ride on the drops if I'm cutting wind or descending (to lower my center of gravity). I ride on the tops to take a break, especially useful for long distance rides. I actually set my bars so they're comfortable for this strategy, but I know people who raise their bars so they can be in the drops even more. No "right" way...

If riding in the drops is comfortable for you then keep that position then try others to see how you like them. Riding in the drops keeps you aero and is an ideal position to sprint from, while riding in the hoods puts you in a more upright position that's more comfortable. I spend most of my time on the hoods however use the drops when I need to.

Yeah, if the drops are more comfortable, then more power to you. Less air resistance that way. I usually spend most of my time on the hoods, and only the drops when moving relatively fast. Climbing is usually 100% hoods. If I'm burnt out tired, or just leisurely cruising along, I'll occasionally switch to the bars.

It's all preference.

By riding on the hoods you still have the option of deeper drop position for when you hit headwinds and descents. If you are comfortable lower down, consider dropping the bars to place your hoods where your hands like to be.

I have 10 positions, which is why drop bars are so much more comfortable for long rides than flat bars. I also think "classic" curve type bars with long flats in the drops are more adaptable to finding comfort in the drops (4,5,7 below) Roughly in order of % usage:

1 Just above the hoods so heels of hands are on bar tape, first two fingers or so are on hoods
2 On the hoods
3 On the tops, right where they curve forward and down
4 Heels of hands on flat part of drops, first couple of fingers on the curve, finger ends touching levers
5 At the very ends of the drops
6 On the tops near the stem - mostly easy pedaling/resting or climbing
7 Whole hands on the curve of the drops, most aero position, with fingers on levers.
8 On the knobs at the front of the hoods (where the levers come out)
9 Same as 8 except leaning down enough for forearms to rest on bars near downcurve
10 Forearms on tops near stem, hands extending out and clasped fake time trial position (very seldom!)

There is also a slight chance that that might indicate an improperly sized bike. Like too short of a reach and handlebars too high.

Usually the drops should be a somewhat extreme option. It's lower than is generally comfortable for long stints, for times like sprints where you can put up with the extra discomfort in exchange for the better aero for short distances.

Proper technique is riding around without using the handle bars waving your hands above your head like a mad man untill you crash, then you come on here and complain about your frame breaking.