While nothing is a effective as The Ultimate Filter (ie you), if that is not possible at all times, you should look into monitoring software, as well as a Filtering Options.

What to look for

• Totally transparent to the computer user.  Even if your child knows you have the monitoring software in place, you don't want it to interfere with the legitimate things he is doing. If you plan to hide it, you don't want it to cause behaviors that cause the child to ask questions or wonder what is going on. And, you can be sure that if the software does change behaviors, the child(ren) will notice.

• Hidden.  Again, even if your child knows the software is there she should not be able to find it and turn it off. If you plan to keep it from the child, it needs to hide from a determined searcher - do not assume that your child would not think to look or not know how to find something. Don't underestimate your child's intelligence. And, if you really have reason to beleive that your child is into things that are truly troublesome, he will almost certainly be quite informed about many aspects of computers, especially issues like this.

• Easy on resources.  If you get something that takes a lot of resources, the computer is liable to really slow down, and you are more likely to have crashes. Also, even a child who does not really care about the monitoring might be tempted to turn it off, just to get the computer to do what he wants.

• Solid, extensive and easy to read reporting.  If you have a hard time understanding what the program is logging, then it's not going to help you. Similiarly, if it doesn't report on what you need or drops information too easily, you are not goin to get the information you need.

• Customizable or configurable.  You want to be able to set what the program tracks and how it behaves based on your needs.   If you are using software that does both filtering and monitoring, then you want if to confine it's activities to the filtering you define, and not interfere with anything else. You may want to adjust the frequency of "snapshots", if your software uses them, for a variety of reasons.

• Make sure that a package has specific features that you need.  If you need more timely reporting, you may want a package that emails you logs automaticallyYou may need to monitor activities other than web access.  The amount of time spent on the internet, or on particualr sites may an issue you need to keep track of, requiring logs with good time tracking. You may need to track other activities as well, so that's something to look at. For a combined monitor / filter, the ability to set different usage levels for different children is crucial. In short think about the things a monitoring (plus filtering) package must be able to handle, and make sure the solution you choose fits.

Issues to Consider

Monitoring of some sort, whether in person, or via software, is not really optional with children and adoloscents. People make mistakes, bad judgements, and give in to temptations. Appropriate monitoring can help deal with that kind of issue. But, how it is done is a critical question. There are halachik, chinuch and practical issues that need to be considered.

In general, I beleive that your children need to know that you are monitoring their usage. They don't necessarily have to know the details, but just the fact that you are actually paying attention to what they are doing. Yes, there may be exceptions, and parents have to make the best decisions for their family without undue reference to what "everyone else" is doing.

I nay case, these are some of the factors you should consider in deciding how you are going to handle the situation.

• What you are trying to accomplish - Are you trying to prevent a problem, or are you trying to find out what is happening? For monitoring software to have a preventative effect, the child needs to know that you are, in fact, monitoring usage. If you have good reason to think that your child will simply try to bypass the monitor if he knows about it, then you may need to keep it a secret, but you are going to have to use other means to prevent your child from doing the wrong things. Either way, realize that this, like any other method, is not a magic bullet that will just take care of the situation.
• How the child(ren) being monitored will react to different scenarios - This is one of the trickiest issues you need to think about when making these decisions. It's the rare child who is really pleased to have his parents constantly monitoring his internet usage, whether in person or via software. But, for instance, a monitoring program that doesn't get "in his face", that doesn't interfere with legitimate activities may be enough to pacify many children. On the other hand, finding out after the fact that someone has been "looking over his shoulder" can often have disastrous effects.
• Effect on the others in the household - Our interactions with our children do not take palce in a vacum. If there are siblings who might be exposed to harmful things is string preventative action is not taken, that's a serious issue. If siblings may form a wrong impression of what is happening or your attitudes this can also be problem. And how the whole issue of monitoring can have a real effect on the dynamics between siblings, as well. 
• School rules - Different schools have different rules regarding internet access in the home. You really want to make sure that whatever decision you make is in accordance with those rules. (If your child's school requires total absence of internet in teh home under any circumstances, and you have access in the home, you have a serious issue that goes far beyond internet access per se.) I beleive that if your school(s) do not have rules, you may be better off not stirring things up. However, whatevever rules exist should be adhered to. (There is generally nothing to stop you from being stricter than the school's rules, if you beleive it necessary.)
• Halachik and other chnuch issues - Many people don't realize this, but parents don't have a free pass on Cherem D'Rabbeinu Gersho, which prohibits reading the private correspondence of another person. There are exceptions, and if a parent has solid reason to beleive that a child is actually doing something wrong, that is clearly one of them. If a person has been clearly warned that correspondence will be read, that generally is an exception, as well. (For more specifics, and for guidance on specific situations, please speak to your Rov!) Beyond that is the clear sense of the Takanah that snooping is wrong and destructive, and should not be done in general. The best way to teach children appropriate behavior is to model it with them not just "outsiders". This is not a theoretical issue. I know of too many incidents of people reading other people's email (almost certainly a violation of Cherem D'Rabbeinu Gershon) or going through people's cell phones and looking at text mesage or the phone book. Even the phone book can be a source of private information and going through one is an intrusion.