I organize by type of garment (like all jackets together) and then by color -- I also will organize from sleeveless to long sleeves for my tops too - that and the fact that I totally splurged when we bought our new house and have a California Closet system and a large closet which really helps keep it organized -- at our old house I had a small dark walk-in closet and I kept losing things. Also, My dresses are organized with the casual ones together, work dresses together and then dressy dresses -- it sounds really anal, but I'm really not - it just makes my insane life less complicated and it's one less thing to stress about. I also tend to purge my closet every season a little bit and a lot every couple of years.
Also, I got a ton of those "huggable hangers" -- but I got the Bed, Bath & Beyond ones -- they take up less room and things don't fall off of them either.