Water heaters should be flushed at least once a year. This helps to control the buildup of mineral deposits. Your water heater will operate more efficiently and this will usually extend the life of the heater.

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[edit] Steps

Locate and shut off power source (circuit breaker or fuses) for electric water heaters only; but leave the water supply on. Gas and LP supply valves for non-electric heaters should be left on.
For natural gas and propane (LP) water heaters, make a note of what the temperature setting is and then turn the thermostat (large red dial on the front of the control) to the lowest setting.
Attach a garden hose to the drain cock located at the bottom of the heater. The drain cock usually looks like a regular hose bib (garden faucet) or a round dial with a threaded hole in the middle. (The drain cock may be hidden under a removable cover).
Extend the garden hose to a place where the water can safely exit the heater (e.g. a drain, a driveway, etc.).
Open the drain cock to allow the water to exit the heater. Caution: the water leaving the heater will be hot and under normal household water pressure. Also note that if the drain cock is made of plastic and the heater is several years old, it may be difficult to open and may break easily if forced.
After five minutes of flushing, fill a bucket with the still flushing water.
Allow the water in the bucket to stand undisturbed for a minute and see if the water is clear or if any sand-like material settles to the bottom. If the water is clear and no sand-like material is observed, go on to step 8. If the water is discolored and/or sand-like material is observed at the bottom of the bucket, repeat steps 5 and 6 until the flush water is completely clear and free of sediment.
Close the drain cock and remove the garden hose.
Turn on the electrical circuit breaker or return the gas control to the setting it was previously at and allow ample time for the water to heat back up.
Enjoy the clean water and the longer lasting more efficient water heater!

[edit] Video

Shows flushing a hot water tank and explains why.

[edit] Tips

Use an old garden hose when draining your water heater
Do not shut off the gas or the water supply to the heater.

[edit] Warnings

Be careful as the contents of the water heater may be very hot.
If you do not feel comfortable doing this work yourself, call a licensed plumber.
Be careful not to break the draincock.
Regular flushing will keep your heater free of debris, but there is a warning from most plumbers: If the valve hasn't been opened in more than five years, it may be best not to attempt turning the handle as the valve may fail.