Sorting isn't a science. Unfortunately.
The methodologies to sort LEGO elements are as diverse as the collectors who sort them. There are similarities between all sorting systems. The range is from all pieces in the same container (small, active collections) to one type, one color piece per container (LEGO Model Shop comes to mind). So, now that I've stated the obvious, I'll attempt to describe my (somewhere in between) methods.
To start, I have more than 1,100 sorting containers ranging from bins 2" x 5" x 1-1/2" to 30 quart containers. The volume of bins I have is enormous. About 1/2 are "nuts and bolts" boxes - less than 1 quart. About 200 are 1 quart (4" x 12" x 4"). The rest are bigger. This translates to about 400 bins/boxes larger than 1 quart. Hundreds of gallons altogether. I keep about 60 11" x 17" paper boxes full of larger parts like Duplo, Beleville, big bricks, burps, etc.
To hold these bins and boxes, I have 10 shelf racks that have a combined footprint of about 80 sq ft. The height varies from 6 to 10 feet tall.
The way I have approached sorting has changed throughout the years.
I began by sorting into three boxes: Bricks, Plates and Other. I didn't concern myself about color or size. Then it became important to separate wheels and tires, large and small, bricks, slopes and plates. Still no color or "other" sorting, but that separation made it to about 10-20 boxes.
Jump ahead 20+ years.
Now, I separate the following:
Bricks: By size and by basic color (red, blue, black, white, yellow). I mix the "other" colors (grey, green, tan, etc.) by size only. Sometimes I have colored parts bagged within the bins of same size bricks. I have many bins for specialized bricks like arches, cylinders and long or tall bricks.
Plates: By size. I have a color subset for 1x2 and 1x4. I do mix shades of colors together within this subset (e.g. red and dark red, grey and dark grey, yellow and orange). I also include single color bags within the same bins of plates. I do not sort 1x1 square plates by color, but I do separate 1 round plates by color.
Slopes: By size and angle but not color.
Wheels/Tires: Very Large, Large, Medium, Small and Tiny. They're all black, right?
I separate all Technic bricks, axles, pins, bushings, gears and so on - by shape, not color (still, lots of bins!). I separate by themes (sort of): Train track, monorail track, electrical, etc.
I try to keep similar parts or families together to minimize hunting while building. This gets to be a problem when, for example the 2 dia. radar dishes are kept across the room from the 4's, 6's and 8's, because the bins used are of different styles or sizes.
Basically, if a part quantity exceeds "a few", it gets considered for separation. If it gets into the "tens of" range it is definitely up for separation. If it gets to the "hundreds of" then color separation becomes very important, although none of this guarantees a separation.
I have separate bins/boxes for large parts (e.g. burps, castle walls, windshields, columns, brackets, chassis), that are not separated by more than category, yet get into the hundreds. These are rarely used parts (by me) and are not accessed often.
There is one more area of "sorting" I do that many of you do not. I separate one of every shape and size of part I have into my "display" or "Element Collection". My primary purchasing has been, for about the last 15 years, to meet the goal of owning every kind of piece LEGO has produced - right back to 1949, when they began to manufacture the "Automatic Binding Bricks". Although my goal may never be completed, I have been able to attain the 95th to 98th percentile. I am always learning about parts I didn't know existed and seeking ownership of them.
My other purchasing goal, getting the parts needed to build large models, has been facilitated by LEGO Shop at Home (now LEGO.com), eBay, Bricklink and, lately, Pick-a-Brick. Many of the parts for ongoing models are kept separate from my "ordinary" parts bins. This prevents me from using them accidentally.
My collection exceeds 1,000,000 pieces! Although I keep my collection sorted pretty well (~98%), that leaves, at any one time, about 20,000 pieces to sort.
There was a time, before my introduction to the internet, that I knew (at least very closely) the number of pieces I owned (~450,000). Never since.
Wayne