Programs like iTunes, Windows Media Player, Zune etc. organize your music collection by updating the tag structure only. These programs often copy your music collection to a designated folder, leaving duplicates spread across your computer. In addition, these programs fail to establish tagging consistency customized to your taste. For example, consider the person who listens primarily to Classic Rock, but may have a few popular dance tracks for a playlist. They may not want (or even understand) the differentiation between genres like Dance, Techno, Electronic, and Trance. Extending the embedded mp3 tag to the folder/file structure is the simplest, but most often overlooked step in organizing your collection.
The following steps are what I find to be the best ways to organize your mp3 collection:

1. Establish a set of encoding, tagging, and album art rules and save it as a text file in your top directory. For example: (downloadable version: musiclibarystd_revb)
   

   ==Music Library Standard Revision A.04==
   5/31/2009
   Grant Pitel
   Adam Pitel–CODING–
   LAME 3.90.3 Quality: 220 kbps VBR / 44.1KHz / Joint Stereo–TAGGING–
   (Rule 1) 
             General Folder structure
                  <Genre>/<Artist>/<Album>
             Special Folder structures
                  <Soundtracks>/<Album>(Rule 2)
   File Naming
             All files must cohere the following format
                  <track number> – <artist> – <song title>
   Exceptions:
             Compilations
                  The artist who performs the song goes in the composer tag
                  In the artists tag enter “Various Artists” and rename the file such that coheres to the following
                  <track number> – <album> – <composer name> – <song title>
             Soundtracks
                  Sound track songs contain “Various Artists” in the artist field. 
   The file name should neglect this field as follows.
                  <track number> – <album> – <song title>(Rule 3)
   Albums with multiple CDs
                   The album tag should contain the CD number so it looks like the following
                   <album (CD #)>
                   Folder structure and file naming remain the same
    
   – IMAGES –
   (Rule 1) All album art needs to be embedded into the music file
   (Rule 2) Each album directory needs to contain an image of the album cover “folder.jpg”

2. Download all your music to a temporary holding directory. This directory will be for all your untagged music. The music will automatically be added to the correct file/folder as you’ll see next.
3. Use Mp3tag to tag, embed album art, and automatically organize the file structure according to the above rules. After tagging the album from Amazon, you can then use that Tag to rewrite the filename and folder structure. Using the above ruleset, the following format string is used in Mp3tag to go from Tag to Filename: “D:\Music\%genre%\%artist%\%album%\$num(%track%,2) – %artist% – %title%” See example video below:
   
4. Disable unnecessary tagging features in iTunes and Windows Media Player such as “Retrieve additional information from the internet” and copy library to a new directory.

Please feel free to share any of your music organization methods in the comments below.