Here is how (without going overboard and driving myself crazy) I document my kids' everyday anecdotes, as well as milestones and photos:
-A monthly email to each of my kiddos. This is just an informal message I send to them, usually telling them how special they are to me, what they've been doing and any milestones they've come upon. Before my 2 year old was talking in sentences, I was writing down his new words as well. We set up email addresses for both kids, one at gmail and one at yahoo (to get the same format: firstname.lastname@example.org. We set the email up and are the "users," but as the boys get older they'll be able to look back and see all their messages from me. Because I'm a little type-A, I also print each message and stick it in their baby book.
-That brings me to the baby book. I fill these out, but they're not very personal and some of the pages are not awesome. For instance, the "New foods I've tried" section on the 1 month-6 month pages. hmmm.
-Notebook for funny quotes or happenings: I have two little notebooks (one for each kid) in our kitchen that are easy to get to. When something funny or noteworthy happens, I jot it down along with the date. I figure these will be great when I want to tell my kids stories about funny things they've done.
-Pictures and videos: We have a video camera, but my husband's Droid is much more accessible, as he always has it on his person. We shoot videos at least twice a week, usually of the normal everyday stuff kids say and do. We also have a camera that I am slowly learning to use. One of my goals this year is to be a better photographer, so I'm taking pictures every day. After I take them, I use my short amount of free time to upload, edit, and organize onto my computer. Jen at A Thousand Words blogged about how to organize pictures on the computer. I am following her advice on labeling the pictures and have found it to suit my compulsive need to organize very well.