Each lego set is in a Container Store shoe box with a label either cut from the original box or printed out from the internet (if we threw the box away too soon). Lost & found bits are in a box of their own. All instruction books are kept in plastic sheet protectors and sorted (by theme then number) in 3-ring binders!
For a deep closet in which things tend to be shoved to the back and forgotten forever, install some rollout drawers like these. Keep the fronts labeled so you'll remember what's lurking in the back of the drawers.