That's a great question. These two words sound so much alike that they cause a good deal of confusion for writers. Like so many issues I'll address in this series, the words are no problem when spoken; only when written are they troublesome.
First let me explain that these two little words both have primary and secondary uses. First we'll talk about their primary uses. If you can get this usage right, you'll be on target with these words 9 times out of 10.
Affect is a primarily used as a verb that means "to act upon" or "to influence."
The number of registrants will affect our decision of where to hold the conference.
The dreary weather affects my mood.
Effect is primarily used as a noun that means "something produced by a cause; a result."
What will be the effect on conference location if we get more than 500 registrants?
This dreary weather is having a bad effect on my mood.
Perhaps the easiest way to remember this rule is with the simple mnemonic RAVEN:
Remember: Affect is a Verb; Effect is a Noun.
Those are the primary meanings of the words. If you can keep those squared away, you'll be doing great!
As for the secondary meanings, the usage is reversed.
Affect can be used as a noun. It's a term used in psychology and psychiatry regarding a feeling or an observed emotional response.
Example: He presented with a flat affect, prompting his physician to suspect a mental illness.
Effect can also be used as a verb, meaning "to bring about."
Example: We are hoping the switch to computerization will effect real improvement in our record-keeping.
Does that clear up the affect/effect question for you? If not, let me know in the Comments section and I'll take another stab at it. And as always, I ask you to please let me know if you have other grammar questions. I'd be happy to help you if I can! You can leave me a comment or email me at RichellaP (at) gmail (dot) com.