How do YOU organize your iTunes library?

My buddy just outgrew his iMac's hard drive so he bought a really nice Lacie external drive and asked me to come over and migrate iTunes, etc.

I literally laughed when I started poking around his music. He wasn't using a single playlist for about 100GB of music. I just always taken it as a given that people with large libraries(and especially "album listeners" like I'm sure most of us are) create a playlist that is the name of the artist and album i.e. Television-Marquee Moon.

He says he just uses cover-flow to navigate through everything. Watching him take like 45 seconds to find a specific album using that method I just had to show him the light.

After a little tutorial he told me that this was like a revelation and he never even thought about doing this where as I never thought about doing it any other way. He freaked out at first because we started making a few hundred playlists but I think I have him on the right track. I mean...pick an album from the playlists listed and listen...right?

Does this make sense? Do ya'll not do this? What do YOU do?