I might be an odd one out, but I tend to arrange games by franchise. All my Zelda games and stuff get their own shelf: Metroid, Mario, Pokemon, Doom, Final Fantasy, Dragon quest, etc. I think this makes for a more expressive setup.
Some things are setup by genre. I have some miscellaneous shooters, party games, sports games, racing games lumped together. I have a shrine to RPGs that only have a few in the series like the Final Fantasy Legend series (saga), Mana, and Phantasy Star stuff all lumped together. Once I fill out the collection they will probably have their own space on the shelf.
All the other odds and bits, particularly stuff that doesn't fit anywhere just gets lumped by console in no particular order. Dumping them on the floor and digging through the pile like an eight-year-old is part of the fun to me.
My favorite section, albeit probably least played section, is my Kaiju section: Godzilla games, Ultraman, King of the Monsters, Primal Rage. Easily the one most visitors comment on when they come over.