Pretty simple question right? If it took you longer than half a second to start rattling off answers you are doing a pretty crappy job of setting goals. I know that it tends to be a loaded question, but if you have to think about your goals to be able to verbalize them you have already started off on the wrong foot.
The first question you need to ask yourself is, "What do I want?". This does not have to exclusively apply to training, you can apply it to any part of your life. Ex. "Matt what do you want?", to which I would reply, "A 600 lb raw Deadlift by the end of 2011".
The next important question to ask yourself is, "Why do I want it?". This is a crucial part of the goal setting process. If you want to do something because your old lady thinks you should, it is a bad choice. Make sure that the thing that you want is something YOU want, not what someone else wants for you. You have to be intrinsically motivated, which means the source of motivation has to come from within you.
Now, I know that acronyms end up being cheesy most of the time, but this one works and has been effective for a long time. Make your goals S.M.A.R.T.
S-Specific. Your goals need to be specific. Not, "I want to lose weight", or "I want a heavier Deadlift". Go take a leak, congratulations, you just lost weight. Put a napkin over your plates and lift it, good job chief, you just lifted a heavier amount of weight. Are those significant improvements? Hell no. "I want to lose 10 lbs". Now we are getting somewhere, you just listed what you want to do in a specific manner.
M-Measurable. You need to be able to measure to track your results. "I don't keep track of my lifting." You sir, are a friggin' idiot. How do you know you are making progress? Keep a log of some sort, even if you jot it down in a notebook that is enough to help keep you accountable. Now when you are tracking your weight, don’t weigh in every day, especially if you are a female. Hormones, water, salt, etc... All these things affect your weight from day to day. Hell, you give me two hours, a wet sauna, a hoodie and sweat pants and I can shed 5 lbs. Did I really lose 5 lbs? No, I just manipulated fluid levels.
A-Attainable- Can you get to the goal? What if my goal was to Deadlift 800lbs by the end of 2011? Or, I want to have a PhD by the end of this month. It is just not attainable. If we changed that up to something more attainable the goal has the opportunity to be met. Which feeds right into the next point...
R-Realistic. Is your goal realistic? This ties right in with attainable. This one should be common sense, but you would be surprised at some of the unrealistic goals I've seen before. Say it is February, and I'm training some frat boy (yes, they are boys) and he wants to gain 10lbs of lean mass and lose 5% body fat by Spring Break in 30-some-odd days. It is just not realistic.
T-Time Restricted. Have a cap on when you want to achieve your goal. If your goal is to lose 10 lbs, when do you want to lose it by? 5 weeks? 12 weeks? 3 years? Give yourself a time-frame and make it challenging. Don;t make your goals too soft on the time restriction. Chances are you'll slack off and not reach them in the end anyway.
Make short-term, mid-term, and long-term goals. Make sure your short-term goals are getting you to your mid-term goals and your mid-term goals are getting you to your long-term goals. Set a "big picture" goal and make sure that you have a step by step process to get yourself to place you want to be. If you have to sit down and re-assess the goals you have set somewhere down the line, which is no problem. In fact, that is a good thing, it means you have the goal setting process down.
Now go out, make some goals, and work your way towards them.