The Seattle Times has a good article on managing passwords. I particularily like their password tips:
1 Use at least seven or eight characters, with numbers, symbols and letters. Random arrangements are stronger than words you can find in the dictionary.
2 Think of a phrase or sentence that you’ll remember but others won’t know and then take the first letter of each word and substitute numbers or symbols for some of them. “My favorite jacket is at the cleaners” becomes MFJIATC or [email protected].
3 If you really want to use your dog’s name, save it for news sites or accounts that don’t contain sensitive information. Use a stronger password for more critical accounts or financial services.
4 If you store your passwords, use an encrypted file or password manager. Don’t leave them on your hard drive in an open file labeled: “passwords.doc.”
There is a good discussion on password managers available to include browser password managers, OpenID, information cards, CardSpace, and others. I happen to like an application called RoboForm. RoboForm manages passwords, identities, generates random passwords and quite a bit more. One key is to make sure that you do use a master password, otherwise all of your information is open if someone gets access to your computer.