What is the best way to hide your chests in Minecraft SMP?

Find a grass block on the forest, in the mountains, or somewhere where people will not likely dig into it. Once you find it, remove 2 grass blocks straight down. Put a chest on the bottom and put your stuff there. Once finished place those 2 grass blocks back on top of the chest.

Hiding a normal chest is completely useless if there are people around using x ray mods or texture packs.

A good way to keep your stuff 100% safe is to use an ender chest. It only has as much space as a normal chest but you can at least store your most important items in it.

Placing an item into ender chest is essentially placing it into a personal bank vault, which you can access from any ender chest in the map. It has a separate inventory for each player in multiplayer. Even if all the ender chests in the map are destroyed, you can access your items again by simply placing down a new one.

Remember that you can compress certain resources like iron and diamonds into blocks, so that they take up less space. (1 block = 9 iron ingots/diamonds)

The only downside is that you could lose access to the ender chest, so you would have to create another one from scratch. It is a good idea to keep some obsidian and eyes of ender inside, so if you find one somewhere randomly, you can get them out and make another one easily.