Here's my advice to those hoping to save a few soles by taking street taxis in Lima:

1) If you don't speak decent Spanish, don't do it.
2) Don't hail them from the airport. Callao is a nasty part of town. As other posters have suggested, if your budget is limited try Green Taxi.
3) Hail them only in the better parts of town---San Isidro, Miraflores, San Borja, Surco, for instance.
4) Negotiate the price before you get in, and if you don't have exact change for the fare, confirm with the driver that he/she has change.
5) Know the best routes to your destination, and if the driver starts to stray from them, start asking questions. It also helps if you have a good sense of direction in the city---something which, given the size of Lima, its complex road network and frequent cloudy conditions, is not something easily acquired by visitors.

I have followed these rules for many years when living in Lima and visiting, and I have never had trouble.