I have several methods. Until recently I had no milling machine, so all milling was done on the lathe using a vertical slide. In the lathe, the first method is a really accurate 1/4" piece of steel that came out of a dead VHS recorder ages ago. I use this in conjunction with a feeler gauge. Second is a cheapish alloy-bodied LED type, as per expylonracer. Both of these are used stationary, but need to be set to run true, and I have the advantage of having a Griptru chuck for the lathe which can be adjusted to about 1/4 thou. The body and probe of the LED indicator are not concentric so it has to be reset every time in is used. A quick dodge, rather than adjusting the chuck is to clock the probe and then turn the spindle to the position where the clock is reading in the middle of the range of runout. I would like one of the posh steel-bodied LED probes, like petertha's (should anyone wish to give me one).
Since getting a milling machine last year, I have bought one of the Starret indicators, and that is what I usually use in the mill. The mill has 0.2" pitch feedscews, so I find the edge and adjust the dial to 100, taking several tries to get it spot on. This means the dial is on zero when the spindle is on the actual edge, which helps to avoid errors.
I occasionally use the ancient trick, when working directly from the tool, of using a cigarette paper to indicate the tool's arrival at the workpiece.