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These days I'm a full time programmer and writer, but before that I worked in small business (retail and wholesale) for almost twenty years. Large companies have many divisions, and a weaker part of the company can be supported by the stronger ones. In small business you sell product or you close up shop.
Maybe it's my small business background, but I regard my books as products to be sold, rather than works of art people should be worshipping. I may treat them as works of art during the writing and editing process, but after that's done they're just widgets, and the aim of the game is to get people to buy my widget instead of someone else's.
Now, it's common knowledge that who you know has nothing to do with getting your book published. (Note that I'm talking about fiction writers here. Non-fiction is completely different.) Most novels are published because somebody thought they could make money off them, and because there are so many writers publishers will choose the books they think they'll make the most money from.
Don't miss Robert's Bidinotto's article 10 Winning Marketing Strategies for Your Self-Published Book
Apart from being generous with copies of your book, you should also have accounts with LJ and Blogger. If you comment on other blogs you'll be leaving a link back to your profile (although commenting for the sake of it is frowned upon. You're commenting because you feel strongly enough to voice an opinion, not just saying something so you can push your link in everyone else's face.)
You should designate one of your blogs as your main point of contact and focus all your posts on that one, else search engines like Technorati won't rate any of your blogs. You can always link to your main blog from the others. You can also use each blog for different things - one for the books, one for personal stuff. That way people interested in your books won't have to wade through posts about your cat(s).
Okay, you have your blogs and you've filled out your profile. There are links to your book on Amazon, B&N and so on, but nobody is visiting. How do you advertise yourself?
The world wide web works best as a linked collection of information, with huge visitor numbers for the sites with the most information. If you want people to visit you need to provide them with something of interest to read, and I don't mean cover shots and sample chapters from your books. Write about writing, declare a goal ("I will have a short story accepted by the end of this year") and blog about your hits and misses. Worried you won't have anything to say? You're supposed to be a writer.
And still nobody comes.
Participate. Become a voice on the internet by joining forums and posting comments on blogs. Give advice, sympathy, some of yourself. Forget about pushing your book and your blog, please, and just join in. Discuss other people's blog posts on yours. Become a familiar face and people WILL check out your blog. Remember, the internet is divided into advertisers (boo hiss) and content providers (yay). If you're in the former camp, you need to mend your ways quickly.
Again, you're not commenting on blogs and forums JUST to get your name out there. This is transparently fake, and people will see right through you.
In LJ there's also a great friends system, similar to the one on Myspace. Unlike Myspace, posts by one person are syndicated to all the other linked blogs, so announcing a competition for a signed copy of your book gets sent to a load more people than you can manage on your own. To access this system you need to add others as friends, and more importantly they need to add you. Think they'll add you if everything you post is a commercial for your book? Nope.
You'll notice I've said little about offline promotion. That's because the internet is vastly more effective from the author's perspective. But not if you're just another author spamming forums and message boards. If you take a look at the writing and reading groups on Myspace there are countless authors hawking their books (buy this, buy me!) and nobody pays any attention. Sometimes a poster will ask a question like 'Can anyone recommend a fantasy book like Lord of the Rings' and someone will pop up saying 'It's not like LOTR, but my book of Fantasy Poetry is available now from ... *PLONK*'
However, when someone says 'I just read this book of fantasy poetry and it was amazing', and then another poster agrees, others may want to know what the fuss is about too. I'm not suggesting for one minute you set up fake 'Joe Bloggs' profiles to post fake reviews and comments about your own book. I consider that tactic about as low as it gets, and have never done it. Anyway, you need hundreds of different people to generate word of mouth, and the people THEY introduce to the book need to do likewise. You're kidding yourself if you think you can start any kind of ball rolling on your own. What you CAN do is set up a profile just for the book, and even profiles for the main character(s).
I participate in forums, groups, messageboards and blogs but I very, very rarely mention my books. If I'm polite, helpful and funny, people will go and look at my profile. I don't even look at it in such a cynical way because I'm polite and helpful in real life (and occasionally even funny), so I just try and be the same online. If someone else mentions my book I sometimes respond, particularly if they ask a question. If the post is off-topic I'll reply in private.
What you need to do is allocate a specific time per day to do a round of the boards and update any conversations you're having. It sounds like work, but I don't mean it like that. Become part of the community, ask questions, be helpful, and remember you're not actually there to sell anything. Alternatively, spend the time writing another book - although I guess eventually you'll still have to do the publicity.
That's my guide to book promotion in the internet era, and I hope you got something out of it. To summarise, you need to sell yourself, not your books. Expect to give out way more than you receive back, and realise other people on the internet are not all potential clients.
Links and places of interest:
Forums (learn the rules, don't spam but set up an effective SIG and join in)
http://www.librarything.com (sign up, get an author page)
http://www.shelfari.com/ (and again)
Amazon has author pages too.