I do it by console and then alphabetically (by series). For example, all the James Bond games are together under 007 even though there's 007: Nightfire, From Russia with Love etc.
Also, by console are in separate parts of my room at the minute. But that's only because space is a real issue in my tiny little box of a room.
Also, some special editions (and games that come in different size boxes) are put in strategic places (either above where it should go) or at the end depending on the size of it.
Some part of me wishes to do it all alphabetically. However, as space is a bit of an issue, I can't afford to have wasted space by putting DS cases next to DVD cases etc. Also, I like how some consoles (PAL PS2 for example) have a very uniform spine which looks pretty cool all together.