Here are a couple helpful links on determining gauge and and a pic of my finished project (for a "what not to do" reference).
Yarn Forward has this to say about gauge.
Knitty.com has a long article about the importance of gauge, here
Suite101.com says this
Ehow.com says this
theknittersbag.com says gives a chart for calculating gauge, here
And of course there are scores of blogs and other websites full of advice but the bottom line, if size and shape is important, knit at least a 4x4 swatch and measure it to make sure you have the size. Everything from weight of the yarn, size of needle, fiber of the yarn and your individual knitting style can affect the end result. It's a small investment of time to take to make your project worth your time and effort!
An example of what not to do: