Congrats! You got that beautiful shiny new bike for Christmas! (or you decided to spend boxing day wrenching on your old faithful bike). Now you want to make sure you adjust the seat right.
The ideal height for the seat is such that when you are sitting on it and put your foot to the bottom of the pedal stroke, you have a slight bend in the knee. Not much, you should be able to lock your knee by pushing your heel down.
When riding if you find you are rocking from side to side, try dropping it a bit.
If you feel pain the front of the knee, you probably have the seat too low.
If you feel pain the back of the knee, you probably have the seat too high.
Adjust as needed to get the perfect height for you.
Once you get the height figured out, adjust the tilt. This is mainly a comfort thing, but keep in mind that if it tilts forward too much you will be supporting your weight on the handle bar, which will cause hand, wrist, and shoulder pain. If it's tilted too far back you will find pain or numbness in the groin. Experiment with different angles until you find the one for you. Women will tend to have seats tilted further down than men.