There is no generally recognized best way to redeem miles, in my opinion. It depends on your own travel patterns and what you would normally expect and be willing to pay for tickets on the routes that you travel, based on the amount of lead time that you have to make reservations. Frequent flier miles give you an alternative currency (vs. good old cash) with which to purchase travel, but you should be prepared to continue to spend cash when that makes sense. (In this context, cash doesn't literally mean just greenbacks, I just mean anything denominated in normal currencies.)

You'll find numerous past threads on FlyerTalk arguing about exactly how many cents each frequent flier mile is worth, and those threads will demonstrate why coming up with a hard & fast number which can be applied to every type of traveler is nearly impossible. However, it is probably worthwhile for you to come to some rough understanding of your usual travel patterns. That better understanding is what will help you spend more wisely in the future, whether you're spending dollars or miles.

For example, here are my itineraries from last year, and how I paid for them.

(1) SJC-SEA-SJC (cash)
(2) SJC-BOS-SJC (cash)
(3) SFO-BWI-SFO (cash)
(4) SJC-PIT-SJC (miles)
(5) SFO-ANC-SFO (voucher)
(6) SFO-SEA-BOS-SFO (miles)
(7) SFO-LAX-SFO (cash)
(8) SFO-PIT-SFO (company paid cash)
(9) SFO-PHL-SFO (cash)

Last year reflects my travel patterns pretty well, actually. I mostly fly to the East Coast seaboard or along the West Coast. Flights along the West Coast are generally so cheap thanks to Alaska, United Shuttle, and Southwest keeping each other honest that I don't expect to ever redeem hard-earned miles on those routes. For flights to the East Coast seaboard, if I can get advance purchase tickets at or under $350, I'm usually probably doing pretty well. I think I paid about $350 for my ticket to BOS, and something like $225 for my ticket to BWI, thanks to Southwest's sale fare and United's decision to match the sale. The published fare for my ticket to PHL was around $300, but I applied a $100 voucher which was going to expire soon. That can certainly be a factor for the savvy frequent traveler -- making sure that they used up their vouchers, travel credits, etc., before expiration. Airlines love it when they issue travelers voluntary denied boarding compensation vouchers which then sit in a desk drawer forgotten until they've expired.

As for the two trips last year for which I did redeem miles, the first was a case of last minute decision to go to a friend's wedding. Given that PIT is a fortress hub for US Airways, the unrestricted coach fare was a cool two thousand dollars. Well, there was no way that I would have been willing to spend two thousand dollars, but I was willing to spend 30,000 miles. (30,000 miles is a funny total. Basically, Northwest allowed me to spend 10,000 miles for one direction, since this qualified as their "off-peak" season and there was still "cheap" FFP award inventory available, then 20,000 miles for the other direction to waive capacity restrictions.)

As for the second trip, I had plenty of advanced notice, but could not price a open-jaw SEA-BOS-SFO ticket for less than $750, and it was important to me to get back to San Francisco sooner rather than later, so I didn't want to do SEA-BOS-SEA-SFO. But United's rules allowed them to issue me an open-jaw for the normal 25,000 miles. The lesson to take away there is that individual FFP's have different rules and regulations, and sometimes, one of them will be able to take care of your travel needs while another one won't be able to (or would cost a lot more miles). So it can be worth making a few extra phone calls to different airlines and see which program would be cheapest.

Lastly, somebody earlier in the thread recommended that you consolidate all your mileage earning activities into a single program. My take on that is that while you do want to pay some attention to concentration, you don't want to be exclusive. It's true that you'll benefit from being able to take advantage of more interesting awards which are only available once you've accumulated six digits of miles in a single program, and if your concentration allows you to earn elite status in that FFP, you'll definitely benefit greatly from the elite status, both in terms of how pleasant your flying experience will be and in terms of your mileage earnings. But, you cannot take advantage of the different in's and out's of different programs if you're only earning miles in one program. And sometimes there are such generous bonuses only available for certain programs that it would be foolish not to consider participating in the bonus offers. For example, I haven't flown a revenue Northwest flight in ages and ages, but I had plenty of miles accrued from Sprint's bonus Northwest WorldPerks miles offers. And I've never flown a Delta flight in my life, but depending on how some program-specific bonuses pan out this year, I may reach a six digit balance in the Delta SkyMiles program.