I annotate on my touch screen devices (android phone, rooted nook color) with Moon+. There's a very nice export functionality in that reader that lets me send all my annotations to my email account. Lovely.
On my non touch screen devices (nook classic), I don't annotate.
I actually plan my reading based on whether or not I'll want to annotate the book. Fiction is for quick reading (usually) with the occasional bookmark if I really need to revisit a page later. Non-fiction cries out for highlighting and note-taking.
Before e-reading, I used highlighters and colored pens.
