Pretty much the same as DrRSwank for me, although the never splitting letters over two shelves thing sounds impractical.
There are plenty of grey areas and tricky exceptions though!
For starters – solo albums and side projects from an artist best known for their work in a group – e.g. Thom Yorke and Philip Selway only have one solo album each so are both filed with Radiohead, but Robert Plant’s solo work is sufficiently substantial and different so gets a separate section from Led Zep (although Page & Plant collaboration *does* go with LZ, in chronological order). Usually once a side project has a couple of albums it can stand alone – e.g. Grinderman now lives separately from Nick Cave (+/- the Bad Seeds).
Also, live albums go chronologically in order of when the concert took place rather than when the record was released. Single artist compilations are generally ordered by the period of recording rather than release date, e.g. Marvin Gaye “Early Years” compilation comes before all of his albums.
Classical is obviously separate, and ordered by composer, then by work. Anything else is crazy. I’ve just decided to take all the comedy and spoken word out to its own section too, it’s been mixed in for too long. Still undecided about whether to leave jazz in though…