Note: I am not sure if this is the best way to write in urdu, but I am using it since few years and I am quite comfortable with it.
Step by Step guide to write in Urdu (For Windows XP & Windows Vista, might work in other versions of windows as well):
1) Download Phonetic Keyboard Layout from Crulp.ORG:
Info: http://crulp.org/software/localization/keyboards/CRULPphonetickbv1.1.html
Download: http://crulp.org/Downloads/localization/keyboards/CRULP_Urdu_Phonetic_kb_v1.1.zip
2) Installation Procedure [Copied from Crulp.ORG page]
Unzip the downloaded file and double click the setup.exe to install a keyboard layout.
To add/remove Keyboard Layouts for Windows XP
- Double click “Regional and Language options” icon
- Press “Language” tab
- Press “Detail” button
- Press “Add” button
- Select “Input Language: “Urdu”, and Keyboard layout/IME : ”CRULP Urdu Phonetic v1.1″
- To remove select a layout and press “Remove” button
To add/remove Keyboard Layouts for Windows Vista
- Double click “Regional and Language options” icon
- Press “Keyboard and Languages” tab
- Press “Change keyboards…” button
- Press “Add” button
- Select “Input Language: “Urdu”, and Keyboard: ”CRULP Urdu Phonetic v1.1″
- To remove select a layout and press “Remove” button
After installing and adding keyboard to Windows, you can either:
1) Use Language Bar to switch between English and Urdu input
To add language bar, right click on Task bar -> Toolbars -> Language Bar
Now you can just click on EN (or UR) icons to switch language.
2) Use shortcut keys to switch between English and Urdu input
To add shortcut keys:
2.a) Open Control Panel
2.b) Open “Regional and Languages Options”
2.c) Click on “Languages” tab
2.d) Click on “Details”
2.e) Click on “Key Settings”
2.f) Use “Change key sequence” button to select the key sequence you want to use to switch between available languages. (I am using Alt+Shift)
اِس کے بعد آپ اردو میں لکھہ سکتے ہیں 
۔
اردو میں لکھتے وقت آپ اپنا فانٹ سائز تھوڑا بڑا رکھیں تاکہ پڑھنے میں آسانی ہو۔
-Salman
