1) Genre
2) Subcategorized alphabetically by Artist within appropriate Genre
3) Further subcategorized alphabetically within Artist by Album Title
4) Further subcategorized, if necessary, by Album Version, Album Release Date, and/or other distinguishing characteristic differentiating otherwise duplicated items.
It was no stretch to do; I've been a vinyl junkie for decades, and that's the system I've always used for my LPs, of which there are literally thousands and thousands. A few years back, the recipe-box file card catalogue system was upgraded to an updatable, searchable database/spreadsheet format, which itself is backed up on a data CD.
For CDs, I use a couple mega-changers slaved to a 5-disk changer, which is the master. The system will display on the TV screen the entire installed catalogue, any Artist/Album/Track info as may be included on a selected CD, and supports keyboard entry of user-defined Album info for each CD, which also is displayed, something quite handy, provided I remember to input it (and leave that CD in that particular carouselle slot), and is damned near out of slots for new CDs at the moment. The empty jewel cases are stored, by the same categories, on shelves in the basement, where also I store LPs which are not at-the-moment in use or awaiting refiling.
For Computer CDs, my categories are Operating Systems, OEM-Specific disks (such as Restore Disks) for my various machines, Peripheral Software, System Utilities, Other Utillities, Applications, Games, Stored Data, and backup disks. Similar organization applies to Zip disks and floppies, though there is a special, ready-at-hand location for all the Emergency Boot Floppies I have, except, usually, for the one I happen to need at any given time :wink: There's also a stack for "Look at this sometime and figure out what's on it" unlabled disks.
I have a few flash memory cards of different sorts and capacities, too, but as they're constantly in rotation among cameras and other devices, with ever-changing content, there's no way or reason I've figured out to categorize them beyond which devices which cards fit.
Of course, then there are the various piles ....