I started tracking my activities using Toggl. The concept is very simple: the site gives you a timer that you can "toggle" to signal when you are starting a certain task. You define different tasks and group them into projects, and you can mark "billable" hours as such (clearly a feature for consultants / freelancers). It features reports (obviously) and other workgroup-related options, a dotNet-based offline tracker, and premium options for paid subscribers.
The first day I used it, it was enlightening: it turns out that I only spent about 3 hours doing actual "core" work. Most of the remaining time was wasted being sidetracked by other internal projects, plus random chitchat. Ok, it was the day Oracle bought Sun, and we were pretty psyched about it (especially me, as the first thought I had when news emerged about the botched IBM/SUN deal was "well, [Oracle] would be a much better fit than IBM; db appliances would be very sexy, and most of [Oracle]'s stack is Java-based already", and the others were all "yeah, keep dreaming!"... then Larry vindicated me), I expect the numbers to get better. If they don't, it means my routine needs improving and I'll work on that, but I feel that without Toggl I probably wouldn't have the sort of hindsight that gives a sense of achieving, which is necessary to maintain continuous efforts.
All in all, Toggl feels cool. Other project-management sites should take note.