It has been fun to read everyone's posts and their methods of sorting fabric so I will get kind of detailed on my storage.
As everyone said, fabric sorting must be done according to how you search for your fabrics. I make baby quilts, reproduction quilts, and "normal" fabric quilts. My fabric storage method fits the types of quilts I make.
I use copy paper boxes that are 11WX17DX10H to store the fabrics. I have shelves in a closet so that I can leave the tops off the boxes for easy viewing and then I close the closet door to keep out light. Fabrics are folded into 4ths on the selvage length and then ruler folded to about 10" squares. This way they sit nicely in the boxes with all of their "spines" showing so I can see what I have without doing any digging. I don't indicate yardage for anything but I can sort of tell by the size of the spine whether it is a couple of yards (good for borders) or not.
I guess I have 6 main categories of fabrics which then I sub-sort as desired. (1) batiks are in no particular order (2) baby flannels are in boxes in no particular order other they are grouped by boy, girl, and general. (3) civil war fabrics are boxed together in no particular order (4) cuddle backings are grouped together (5) garment fabrics are grouped together in boxes (6) and finally, by far the largest stash (24 copy boxes) are my general cottons for quilting. Those I sort by color but I also separately box the florals and other prints that have too many colors in them to really fit into any color group. I also separated out the Holiday themed fabrics into their own box. I don't have many novelty fabrics, 30's prints, or non-flannel juvenile but if I did I would probably have separate boxes for them too. The large pieces appropriate for backings are stacked on a shelf. I also have small stacks of oriental and metallics since I don't want those mixed in with the "sorted by color" boxes.
I keep all fabrics in these boxes unless they are truly worthless for anything and then they get tossed into scrap drawers. For smaller pieces that will not fold into a 10X10" square, I just fold it smaller and drape it over another "spine" so that I can see both fabrics. For the way I shop my stash it would not be useful to have separate areas for fabrics less than a yard; I like to see all of the fabrics within a color group or category regardless of their size since I prefer my quilts to have 50 or more fabrics in them.
Let us know how you decide to sort your fabics to meet your shopping style!