First of all, in most places chances are that taxis won't be too bad. Chinese roads are sort of linear looney bins, but your taxi driver can probably deal with it better than most. It's not that taxi drivers are necessarily so good at driving, just that they're better than the others on the road. The combination of inexperience with the endemic lack of consideration for others, plus the paramount importance of gaining "face" in all things, is pretty dangerous and giving many people here a car is kind of like giving an 8-year-old boy his own flame thrower.
Also, as long as your taxi driver is using the taxi's fare meter the odds of your being ripped off by a taxi driver these days are fairly slight. The profusion of complaints in earlier times seems to have brought on a pretty tight regulation of taxis in most cities. There are, of course, exceptions to this! Most cities now have "hotline" numbers to call if you do meet abuse from a driver; how effective these actually are no doubt varies wildly with location. In small towns and rural areas, all bets are off on this one. Be careful here.
It's really hard to characterize the Chinese taxi driver. I've seen some fine humans behind the wheel of taxis in China, and I've seen idiots who defy description. Many can be very helpful and will help load/unload bags or help a foreigner solve small problems if they can. Many more are just indifferent, and a significant minority will be downright hostile. In general drivers will be willing to do things such as let you stop, and wait for you while you make a quick run into a store.
"Available" taxis are marked by a light shining just inside the windshield...usually red but other colors are seen too. Taxis showing available may not stop for you if the driver is on his way to a call passenger, on his way to lunch, or just doesn't like your looks. Initial fare at flagfall seems to be sort of an indicator of a city's prosperity- it will be either 5, 8, or 10 RMB in all Chinese cities. Meters are required (technically) to be in working order and will display the current fare as the trip progresses. Drivers usually sit inside a sort of protective shell of transparent plastic or perforated steel; exactly who is being protected from whom is still open to debate. This wall can make the front seat a bit cramped if you're a bit wide at the shoulder and/or hip. Larger cities now require passengers in front seats to wear seatbelts, but the back seats may not have them. In the boonies there are likely to be no seatbelts at all. In most cities the dashboard of the taxi will sport a small plate bearing the driver's photo, ID number, and company contact information...useful if there is a problem. Back seats will often have a small information sheet, frequently bearing gems like "Drunkards and psychos without guardians are prohibited from taking taxis."
In smaller cities, when you arrive at your destination, the driver will simply read off the fare amount in Chinese. Some cities give you the choice of using prepaid cards for transport including taxis- in such places the driver will ask "Xian jing?", which means "Will you pay cash?". Repeat the phrase back to him, and he will read the fare and accept your cash. Tipping is not a common practice here, and I've had many drivers refuse to accept any form of tip. I always offer a tip if the driver has waited a long time, hauled a lot of baggage, or otherwise performed a significant extra service.
Of course, most Chinese do not own cars, and many cities seem to have taxis that are overabundant to the point of being a nuisance. However, bear in mind that this will quickly change when the weather turns bad- the moment raindrops start to fall everyone in town will dive for a taxi, and you may face quite a lengthy wait for a ride under such conditions.
GENERAL TAXI-TAKING TIPS:
1. Sometimes drivers will try to refuse taking you if they don't like your destination or think they can get more money from someone else, especially if it's raining. NEVER tell a driver where you want to go before you and your belongings are firmly planted in the back seat with your door closed and locked. (NOTE- This isn't an option if you're using a taxi pirate- see #4 below!) If the driver squeals, simply refuse to budge from your spot until you are taken where you want to go- usually these drivers will relent after a few moments and deliver you just to get rid of you. Don't take any guff.
2. Despite widespread programs to teach English to taxi drivers, you're likely to win the Lottery Grand Prize 3 or 4 times before you encounter a driver who can speak a useful level of English. Hell, in many places you'll be lucky if they can speak standard Mandarin Chinese. If you aren't SURE you can say your destination name and address in Chinese, have it written out in Chinese for the driver to read. A lot of drivers seem to have just hit town a few days ago and they don't always know the town any better than you do. I've asked (in Chinese) Beijing drivers to take me to Tiananmen Square, only to get a stupid look and a "Hunh?" in response! Taxis are one of the many places where mobile phones are a Godsend for surviving here...you can call someone and have them talk to the driver, or send the address and directions by SMS. Many, but not all, drivers will discount the meter fare if they have gotten lost trying to find your destination.
3. Many cities have zones on major streets where cars are prohibited from stopping except perhaps to quickly drop someone off. If a lot of empty taxis are waving you aside, you may be in such a zone- look for a taxi stand or head to a large hotel.
4. In most cities, train and bus stations will have official taxi queues. These are your best bet, but they will often entail some waiting. Sometimes a LOT of waiting. There are Taxi Pirates circling these places like flies on poo, or guys with private cars hanging around just outside the station, and they will offer to take you where you want to go with no waiting. Bear in mind that these vehicles are unlicensed, unmetered (just because the car HAS a meter doesn't mean he will USE it), and will invariably charge you a horrendously inflated price...there have been incidents of worse crimes than overcharging here too. Real official taxis are strongly recommended and worth the wait. If you feel you MUST use one of the pirates, firmly negotiate and settle on a price before getting into the car or allowing your bags to be loaded. Make sure you have exact change and don't budge from the agreed price once you're at the destination.
5. ALWAYS take the taxi receipt. If one isn't offered, insist on one. It will be a big help if you leave possessions inside the taxi or if there are any other problems. A driver who refuses to give you a receipt has probably just cheated you on the fare...I have seen taxis with doctored meters!
6. Don't take any abuse. In some places many drivers won't stop for a foreigner, especially large menacing-looking ones like me. I have been known to stand in the middle of the road, or snake out a hand and snatch open the door of a moving taxi, just to get a damn ride. In rainy/icy conditions, competition for taxis can become vicious...when a taxi stops be prepared to defend it from those who will try to slide in ahead of you. In such cases you may have to become physically assertive (i.e. borderline violent) to keep your ride. Please bear in mind that I am large and strong and have balls the size of cantaloupes...these methods aren't for everyone. If you have problems with a driver, write down all of the information about the taxi you can get, including its license tag number. In extreme cases, scream loudly for a policeman.
Happy motoring!