I currently log the total number of hours I work each day in an OpenOffice Spreadsheet. I input the start time, lunch/break time, and end time, and it calculates the total hours worked. I'm not savvy enough to create this type of spreadsheet myself, so I looked through a large number of templates online before finding one that works as I've described above. I'm still not crazy about the way that this spreadsheet is laid out.
If you can link to a spreadsheet available for download similar to the one described above, please do so in the comments.
If you use time-logging for various distinct projects throughout the day, please describe this process and link to the software you use (if possible).
More of a meta-discussion: how time-logging this enhanced your performance or time management?, for what types of projects/activities is it best to time-log?, general comments about the idea
At MIRI we use Harvest to track employee and contractor time, and it's been largely successful.
We track our time against different projects and have one General project that we use when we aren't working on something that makes sense to create a separate project for. One of the reasons we decided on Harvest is because their reporting tools are really great, which is important to us. The other one is that even though it's fairly powerful, the interface is easy to work with.
My preferred way to use their system is with timers. When I start working each day I start a timer on our General project and process my inbox and figure out what I'm going to work on for that day. After that, I start timers as needed for the various projects I end up working on. With their apps it's really easy to switch from one timer to another and add a new timer so I haven't found doing so to burdensome. Timer are also available through their web app which is nice.
Their exporting functionality is quite robust as well so you don't have to worry about having your data locked in.
I'd also have a look at Freckle. They were my number one choice in terms of user experience, but they lacked a feature we needed (though I can't remember what it is anymore). Looks like they have made a lot of improvements since last I checked.