I organized my sewing area last winter. I used a baker's shelf system and used clear plastic boxes for small pieces. I sorted them by color. I have a red box, a green box, etc. Larger pieces (at least 1/2 yard) I fold and stack.... again by color. I can see the edges of the fabric and pick what I want. I also pin a sticky note on each piece that tells me how much I have of that fabric (1yd, 2 1/3 yds, etc.)
I've found that I actually use the fabric pieces instead of just go out and buy something new.... It's saved me money and helped me use up some things I've had for quite a while.
Also, check out the scrappy quilt sites mentioned on the board.... there are some beautiful quilts out there using small scraps.