I am going to start this by stating a central point of this tutorial. The Truss Rod's Primary Function Is Not To Ajust Your Action!!
It is not a magic wand that changes your action. Thinking this and acting upon if can really screw up your guitar. Clear? Then I shall proceed.
Before you touch your truss you need to know the basics of doing so and what exactly it is. A truss is in essence a metal rod anchored at either end of the neck inside a solid metal housing so when you tighten the rod the it pulls on either end of your neck. This in turn reduces the amount that the neck bends (or bows). If you loosen the rod on the other hand then the rod loosens and does not pull on the neck to straighten it thereby increasing bow. (NB there are some trusses that operate in the opposite direction as well.)
The truss is an integral part of any steel strung guitar (with one or two exceptions eg Steinbergers, Vigier's and Klein, without it the neck would either snap or be badly warped very fast. Its main function is to prevent this by counteracting the pull of the strings, which bends the neck. The most common misconception is that it will adjust your action. To some degree this is true however it changes the action by changing the curvature of the neck not by raising or lowering the strings. For example in a bowed neck the action will be low at the top and bottom frets but high in the middle, to visualize this think of it side on with the string underneath the neck. The string is like a flat piece of ground with the neck forming a low arch over it. The angle of bow is known as the neck's relief.
Relief is measured at the 7th fret when both the first and last frets are pressed. The gap between the low/high E string and the top of the 7th fret is the amount of relief. This can be measured with a feeler gauge, but if you are cheap (let's face it who isn't?) You can buy very thin picks and use those to measure the relief height. The height that it should be can vary quite a bit, between 0.004 and 0.012 for guitars is about average (that's 0.1mm to 0.3mm) these can be adjusted to taste however (BB King has a much larger relief than that and Allan Holdsworth has no relief.) For basses 0.008 to 0.018 (0.2mm to 0.4 or 0.5mm.)
When the neck is flat on the other hand this instead forms two parallel lines, this is for many people the ideal since it allows you to get the action as low as possible all the way up the neck. However this has it's draw back as it can cause the strings to buzz so get as close to parallel as you can without string buzz. Sadly the ideal parallel lines are rather hard to achieve due to the fact that when your strings vibrate they vibrate in an elliptical shape with the most movement in the middle (12th fret), which means that usually some bow is necessary. Also continuing to tighten a truss rod after the neck is dead flat serves no purpose as the instrument will simply buzz as the strings vibrate against the hump in the center of the board that has been created by back bowing the neck. However after any kind of adjustment of this sort you need to re-intonate or no matter how carefully you tune your guitar it will sound wrong (acoustics being the exception).
The truss can to some extent also be used in copying anther person's tone, if you have it set similar to SRV with a reasonably large amount of bow, then it will give a very clear note and help you nearer to his crisp tone. If on the other hand you want say Kirk Hammet or Vai-esque tone then you need it as low as possible, the notes will not ring clear as much but their easier to play.
Finally adjusting it. This is something you need to be careful when doing as not taking care can actually damage or even snap the neck (not what we want!). But as long as you follow a few simple rules you should be absolutely fine.
01. Before you even touch your guitar make sure you have the right tools that fit into the adjustment nut. Martins and many other acoustic guitars with truss rod nuts beneath the f/b extension use a 5mm allen head wrench. Gibsons and others with a larger acorn style nut at the peghead use a 5/16" nut socket. Taylor uses a smaller 1/4" nut socket. Many Fender Electrics use a 1/8" allen head wrench. If you don't you will damage the nut and could render future adjustments impossible.
02. Make two marks, one on the truss and one on the guitar (pencil or similar) that line up so you can tell how far it's moved and if necessary return it to the way it was.
03.Never Ever move it more that an 8th of a turn at once, I'll repeated that to make absolutely sure you've got it, Never Ever move it more that an 8th of a turn at once. This is because a small adjustment will go a long way with this you won't be spinning it round and round like a wing nut, if you do your neck will snap and hopefully hit you in the face for being a moron.
04. Always start by loosening the nut first. If it is already as tight as it will go and you try to tighten it some more...crack! See ya truss rod, hello heartbreak.
05. Adjustments are made with the instrument strung and tuned up (how can you tell what it needs when it's got no strings bowing the neck eh?) you also hold it how you would if you were playing because believe it or not this actually can make a difference to the neck. (NB some guitars require you to slack off the D and G strings loosened to fit the Key in however after the adjustment tighten them up again. Also some guitars require you to remove the neck completely to access the truss rod (eg telecasters)
06. Check the neck's relief (bow) after each adjustment using the string method further up.
07. If it really doesn't want to move or you think something not right take it to a shop. A truss adjustment isn't expensive at all and will take ten minutes max. And hey if they **** it up then you get a free guitar!
Hope this has been of some use to you and good luck.
Special thanks to Power freak since I borrowed paragraph 4 from his GB&C FAQ.