Kat over at Steady Mom uses index cards in an index card box with dividers. The dividers list the months and each card represents a day of the year. Whenever something memorable happens, a short description is written down on the card for that day.
We like the fact that the index cards are small enough to keep out on a kitchen table or counter, so we'd actually be more likely to remember to fill them out.
We'd also consider using this for when your toddler starts talking and saying some really funny things.
Image: Steady Mom