effort estimation

Hi,

I wanted to ask services/consultancy companies/freelancers as to what process they follow to estimate the amount of work before quoting number of hours to their clients. This has long baffled me and I mostly estimate on best effort basis and market value. I would like to understand the processes companies/freelancers follow to do this and if there could be a empirical way to do this. Do you guys use time sheets to monitor your and your team's efficiency? Do you find the data in time sheet useful for future estimations?