I don't do "physical" notes (eg: notebook or pieces of paper). They can't be indexed/searched, they're difficult to keep track of, damage easily, and aren't accessible from remote locations. I do everything on the computer, including note-taking. The notes cover everything from current status and future goals to how things work, why certain parts were selected, problems I've encountered, changes I want to make in future revs, etc.
Each project gets its own CVS project where all schematics, layout files, gerbers, firmware, supporting software, and notes live. When a board is fabbed, I make a snapshot copy of the entire hardware directory (schematics, layout, gerbers, BOM, and notes) for that version so it's all saved even when the primary files continue being updated for later revs. All hardware goes in a box/bag for the project when it's cleaned up, and the CVS repo is mirrored across multiple systems, drives, and physical locations for redundancy.
This approach is easily maintainable, easily scaleable, and allows me to work on or reference any of the design files or notes from any project, at any time, from any computer, in any location. Any changes I make are uploaded to the central server whenever I get an internet connection, and are then easily distributed to any working copies of the project on any other machine with a single command. It's also about as close as I can get to complete data security. Even if my house burns down, nothing is lost except the physical boards/parts. CVS also provides version control, which allows me to drop back to previous versions of any file if I screw something up.