I predominantly work and store by color. Fabric is sorted by color and stored in cubes in a closet. In one cube, for example, all sizes of reds and pinks, from a fat eighth to yardage, go in a stack at the bottom. If it is smaller than a fat eighth, it goes in a small basket on top of the stack.
Fabrics that are hand dyed, hand painted, 30's, batiks or Asian are stacked separately on a shelf.