AT HOME
Most of us live in walk-ups here in Hyde Park, and it's true that this can be a pain if you store one or more bicycles in your living quarters. But that's obviously the best strategy. I generally keep the nice bike upstairs and the not-so-nice bike in the basement. And if you do keep your bicycle in a shared access space like a basement or laundry room, be sure to lock it to something secure. I hear just as many stories of bicycle stolen from basements as on the street. Don't think for a second that if it requires key access that these are secure spaces.
AT WORK/SCHOOL
If you must ride something nice to work, you should either accept the likelihood of theft, or try to bring it inside... and even then, consider securing it to something heavy, like your lab partner. My favorite strategy is to lock up right next to something shiny and new, or improperly secured. Removing logos may or may not help, but it makes me feel safer locking up next to something with banner ads on the downtube.
AROUND CHICAGO
If running errands or bar hopping at night, try not to forget where you locked your bike. I can't count how many times I hear, "I left it somewhere in Wicker Park, but woke up in Logan Square" -- it won't be there when you return, friend. Remember than many places downtown (like Trader Joe's) have semi-secure car parking with bike racks. Also try to find places that have bike parking for employees. Use parking meters in front of cafes with windows rather than fences in shady alleys. Keep your bike a little dirty.
LOCKS
Now that u-locks are fairly ubiquitous, they're no longer the deterrent that they once were. But they are still far better than cable locks, which should be avoided in most* cases. Use the smallest u-lock that works with your frame. In most cases, you will want to lock the downtube and front wheel to a pole or rack, although I personally prefer the Sheldon Brown method. For commuters, eliminating quick releases is a good idea, either with locking or hex head skewers ($10-60). As for the various levels and ranges of u-locks, I'm of the opinion that the higher tiers don't make a lot of sense. The difference between a $35 lock and an $80 lock is only 30 seconds to a power-tool equipped thief, and the more expensive locks are heavier.
*Friends may scoff at this article, knowing that I regularly leave my bikes either completely unlocked or tethered with a tiny retractable ski-style lock ($20). While the latter is a completely legitimate, if mild, form of security for cafe pit stops and the like, I don't recommend the former unless you're actively *trying* to have a bicycle stolen so as to develop an excuse to build a new one.
And if your ride is stolen, be sure to report it to the police and register it at the Chicago Stolen Bicycle Registry.