To set your site up in Google Webmaster Tools, you’ll need to sign up for a Google account. Google requires you to set up a Gmail email account now. If you don’t want a Gmail account, you can check out Melanie Pinola’s article on how to do this.
Once you have a Google account, you can set up a Webmaster Tools account by going to www.google.com/webmasters. Click the Add a Site button, and follow the instructions. You’ll need to insert a meta tag or upload a blank html file to verify that you are the owner of your website.
Once you’ve added your site, you’ll be able to see your Google keyword rankings by clicking on the Traffic link and selecting Search queries on the left side of your screen as shown below.
Next, you’ll be taken to a page that looks like the one below. You’ll be able to see your average position over a period of time. You can sort the results by clicking the Avg. position header.
There’s much more that can be done with Google Webmaster Tools. Maybe I’ll touch up on the topics if I have enough requests.