There are many sites that give techniques for setting seat height. The fundamentals is that your leg length sets the height. Variable inlcude crank length. There is a generally recognized angle of maximum extension that is optimum, so at the bottom of the stroke you have only a slight bend at the knee.
For fine tuning, assuming you have your seat set correctly for your leg length is to ride a number of hours over a week then move your seat up or down just a few millimeters, then ride the same rides again, noting how you feel and your performance change.
One rule of thumb is that if you ride and get knee pain toward the front of your knee your seat is too low. If the pain is behind your knee, your seat is too high. There is only a narrow range that works for a particular individual.
There are complicating factors as well. Ideally legs should move up and down like pistons, but some people have a tendency, possibly due to leg-length differences, to have a small rotational motion at the knee which cause joint stress. Cleat position and for the case of leg differences, wedges can be used to help correct such problems.
As far as basic seat height adjustment, if you have been riding with the seat too low (common among recreational riders who did not get properly fit by the bike shop) you are accustomed to such a position. If your seat is then raised to where it should be, ideally, you will have a sense that you are sitting too high. The reason for a lot of riding with one position is to get you acommodated to that position. Do not make a major change in position since it will throw you off.
Learn about proper fit (most high-end bike sites talk about fit). They all same basically the same things. Bottom line is you want your legs to get strong but you don't want your joints to be damaged.
