I'm interested in this topic, too. Thinking about paying for LastPass, since I often use my phone and/or iPad in addition to PC.
I'm not sure I'm quite geeky enough to use Chris' method.
A hearty recommendation for LastPass. Makes everything SO much easier (and purportedly safer). If you go this route, you should also look at it's sister/brother bookmarks/favorites manager - xmarks. Together, $20 per year to use for PCs and mobile stuff. Only combo of password & favorites/passwords tools from a single company.
A bit of advice - standardize on one browser on all of your devices. If trying to use for Chrome AND IE, things can get wonky with errors and duplicates.
I think you will really like this setup. If not, LastPass is excellent by itself.