SharePoint Audit Logs

Audit logs can be enabled at the following levels,
1. Site Collection
2. Site
3. List / Library (information policy)

Some must reads,

http://blogs.msdn.com/b/subhajitc/archive/2009/05/20/tip-the-untold-story-of-audit-logs-in-sharepoint.aspx

http://sharepointauditlog.codeplex.com/

Item level auditing,

http://msdn.microsoft.com/en-us/library/bb397403(v=office.12).aspx#MOSS2007ItemLevelAudit_ItemLevelAuditing