Here is a step-by-step procedure on balanacing wheels and tires.
Click on any pic for a higher resolution version.
Tools needed:
- static wheel balancer
- wheel weights
- chalk (or some kind of temporary marking tool)
- removable tape (such as blue painters tape or masking tape)
- duct tape (optional)
If it hasn't already been done, remove any old wheel weights that were left from the installation of your previous tire on the wheel. For optimal balancing, make sure the lightest part of the tire (denoted with a painted dot on the sidewall) is mounted at the heaviest part of the wheel (usually at the valve stem). For the front wheel, remove all wheel spacers. For the rear wheel, remove all spacers and the cush drive. Its okay to leave the brake rotors on the wheels.
Here is a typical static wheel balancer. It'll consist of a steel shaft, tapered universal cones, bearings for the steel shaft to spin on, and something to hold the whole thing up in the air.
Make sure your wheel balancer is straight and level. Some balancers come with a level bubble and an adjustable base.
Insert the steel shaft throught the wheel hub and secure the wheel onto the hub using the tapered universal cones. Center the wheel on the shaft as best as you can.
Place wheel on the wheel balancer. The wheel will spin on the shaft such that gravity wil have the heaviest part of the wheel down to the bottom and the lightest part of the wheel on top. Use the chalk to mark the lightest part of the wheel.
Repeat this step several times to verify that the marked spot is indeed the lightest part of the wheel.
If the wheel does not stop at the same spot in a consistent manner, then you've lucked out and have a well balanced wheel already. Proceed no further 
Tape some wheel weights to the inside of the wheel to counteract the heaviest part of the wheel. Note: The number of weights you will need to mount will vary
Move the weighted location to the 3 or 9 o'clock position.
NOTE: the pic shows my rear wheel without its brake rotor. It is not necessary to remove the brake rotors to balance your wheels.
Gravity will again pull the heaviest part of the wheel to the bottom. If the weighted section is too light (i.e. it moves back up to the 12'oclock position), add more wheel weight. If the weighted section is too heavy (e.g. it will move to the 6'oclock position), subtract wheel weight. Ideally, you want to add enough weight such that wheel will have little to no movement. (Note: since you're dealing with an almost frictionless system, this can take a long time if you're the anal type.)
Wheel weights come in units of 7 grams (1/4 oz). The most likely scenario is that you'll need to add weight such that it will not be a multiple of 7 grams. Supose you need somewhere between 2 weights (14 grams) and 3 weights (21 grams). Since you can't install weights at lesser value than 7 grams, pick the lesser of evils (you'll know what I mean by this when you actually do this procedure).
Once you're satisfied that you have the right amount of weight, remove the adhesive back on the back of the wheel weight and install it permanently onto the wheel.
Double check that you have installed the weights corectly by verifiying that wheel is not stopping consistenly in the same place.
This next step is optional. The wheel weights' adhesive isn't very strong. Its quite possible that it can come off and become a hazard to yourself and/or traffic around you. To minimize this risk, I cover the wheel weights in duct tape.
The whole process will take about 10 minutes or so. It may take longer if you're new to this.
Okay, we're done. Remount your wheels onto your bike and ride
 badfish'05 600RR Purple/Black |  |