I use a simple file-folder structure under My Pictures to store photos.
\My Pictures\PhotosEach year I back up the current year's photos to CD/DVD and take a copy offsite. I test the backups annually as well. I back up current year photos to Mozy.\<year> e.g. 2012\<mm-dd - collection Name> e.g. 10-01 - Sunset Photos\pxxxxxxxx.jpg