The main objective when insulating your home is to create a heat-retaining envelope, one that will contain and put to best use the heat produced by your heating unit. To achieve this, you'll need to take different approaches, using different materials in appropriate locations.
First, consider air movement. In winter, the colder outside air enters the home, and the heated inside air naturally rises. These are the two forms of air movement that you most need to control – leakage of cold air from the outside into the house, and loss of heated air from the house to the outside.
External colder air enters the house any way it can. It moves through cracks around doors or windows, through gaps where the wood walls of the house connect to the masonry foundation, and through other spaces, such as around outside water faucets. It will also radiate from cold window glass. To correct air leakage, you must close or seal the gaps. Around doors or windows, use one of the many available types of weatherstripping. For gaps between wood and masonry, or around door or window frames, caulking is the solution. To block cold radiating from glass, add storm windows, insulating glass, or even plastic "shrink wrap" barriers to create a pocket of trapped air to act as insulation.
Inside the house, the air that you've paid to heat is also moving, rising up to and through the roof. To a lesser extent, it also moves out through the side walls and windows. The first step in controlling this movement is to get the heated air to where you want to use it. If you have a furnace, the warm air moves through a system of pipes, called "ducts." They can and do leak, allowing warm air to escape where you won't use it, as in the basement. Prevent this air loss by sealing all joints in the ducts with duct mastic, and by insulating ducts that pass through unheated areas, like a basement crawl space or behind an attic knee wall. If your basement furnace has a register in the plenum, close it. (Most often, heat radiating from the furnace and ducts will warm the basement sufficiently.) If the heat source in your home is a boiler, it is relatively easy to insulate the water pipes that carry heat to the rest of your house.
Once you've made sure the heat is getting where you want it, keep that warm air where it belongs by sealing gaps as described above. In addition, close doors and turn off the heat in unused rooms. Seal around anything that passes from heated floors into the attic (such as the chimney, water or soil pipes, or wires.) All these holes allow the rising warm air to move out of the house. Only when you've done all these steps are you ready to look at house insulation.
There are several types of insulation, but all are designed to contain heat within your house. If your attic is finished, your best strategy is to add insulation behind the ceiling and ceiling walls. Insulating in this way will allow the heat from the other floors to pass through to warm the attic, but keep it from being lost through the roof. If your attic is unfinished and used primarily for storage, your most effective strategy will be to insulate the attic floor. This will retain the heat in the house below it and leave the attic cold. (If you later decide to use that attic as living space, it's relatively simple to add a supplemental heating source for that area.) In either case, the goal should be to insulate the living space of the house, while allowing the roof to remain the same temperature as the outside.
Insulation works on the same principles that a storm window does. It traps air, and the trapped air provides an insulating barrier. That is why thicker insulation has a higher "R value," a measure of the ability of a material to resist heat flow through it. When you stuff or compress insulation, you reduce its R-value, because you reduce the amount of air it can trap.
The same thing happens if the insulation gets damp or wet from moisture in the house. As it mats down, its R-value decreases. This is why adequate ventilation in an attic is so important. Attic vents allow air movement, which carries away moisture and thus maintains the insulation at its peak effectiveness.
Various forms of insulation and weatherization work together in your house to keep the cold air out and the warm air in. When you adopt strategies like these, the savings will translate into lower energy costs, and more comfort in your home.