After finishing a chapter I write a quick prose summary of what happened, just two to four sentences. I've found that summarizing the action in my own words and in complete sentences makes it stick in my mind far better than point form notes. After that I review what I underlined and pick out what still seems important and write it down as notes or quotes, as appropriate.And take a look at this fantastic picture:
Unlike me, Sylvia likes to use a mechanical pencil when she marks her books, and she also uses a moleskin journal for her notes, a terrific example of how readers find their own style and their own tools. Be sure to read the rest of the post. And see all of Sylvia's posts about Don Quixote at Tilting at Windmills.