Everyone knits differently, and works on different projects. This will have an effect on the larger storage choices, but the smaller packaging I recommend will be the same. The yarn needs to be clean and dry, and you need to bag it in dry circumstances (not on a rainy day near an open window!) Lay out your bags, yarn, index cards, and a Sharpie marker.
Each individual skein or group of skeins in a particular dye lot needs to go into its own bag. So if you have 4 skeins of Mountain Colors Bearfoot in Juniper colorway, they'll all go into the same plastic bag. Or, if you have 2 full skeins and a partial skein of Bearfoot, they will also go in the same bag. The total contents of each bag should be weighed on the kitchen scale. The bag contents will be listed on an index card in large, bold writing as follows:
Mountain Colors Bearfoot
|zip close bags|
426 grams total
If your stash is large, you'll want to squeeze all the air out of the bag before you close it. Most skeins are almost 1/2 air! Squeezing it out gives you more storage room. (Don't worry, it bounces back after a few hours out of the bag.) The purpose of the big printing on the index cards is that it's easier to read than a ball band, and gives you all the information in one place.
Now, the question I'm always asked at this point is, "Why do we have to weigh everything?" Because you can tell how much yardage you have by knowing the weight. If your yarn gives you 200yds per 50g, you do the math and get 4yds per gram. Now, however many grams are listed on the index cards multiplied by the number of yards per gram = how much yardage you have in your stash. Exact yardage is great to know before you start a new project. The pattern will tell you how much yarn it needs, and you know at a glance whether you have enough.
Group yarns as you wish. I choose to group by weight and by fiber. Worsted cotton has a bin, worsted alpaca is in another, and worsted wools are in another. (My stash is embarrassingly huge!) Other people group by color, manufacturer, season, or whether it's machine or hand spun.
Doing all of this takes some time. You may not want to do it all in one sitting, or even one weekend. But when you're finished, your stash will be compact, safe from pests, smells, and other contaminates, and neat. What more can a knitter ask for?