What are some considerations in organizing apps in the dock? I am relatively new to Mac and OS X (4 months now). While I build my collection of preferred applications my Dock keeps on growing. It now takes about 70% of my screen width and I start to find it a bit messy.
I like to keep things organised and was wondering what are common practices to do so?

I know some people organise apps in folders by category/type, but how do I do it actually?  

How is the icon for such a folder selected? Can I customise it?

PS. Screenshots are welcome.
PS2. If you have any recommendations of icon sources for organising Apps into folders, that'd be helpful, too.
There are lots of little application launcher utilities available, to name two Overflow and the venerable DragThing.

Personally, I prefer keyboard-based launchers like Alfred or LaunchBar.

OS X Lion will have feature called Launchpad which looks like it will be a good replacement to the dock for launching applications.

Organizing Apps in the Finder or launching them all via the Dock is rather futile, in my opinion — unless you have a very small collection of Applications…

If you're looking for folder icons, there are tons of online sources. I recommend the Iconfactory to start. 

Customization: in the Finder if you use the Command Get Info in the file menu on a selected folder (also available in the right-click contextual menu), you can select the icon in the info window top-left. From there you can copy the icon resources and paste them.

So that's how you can customize the folders, copy icons from a downloaded folder source, and paste them into your new folders. Panic software produces an excellent Application for icon management that can also streamline this process called CandyBar.