What's the best way to store lettuce in the refrigerator?

It depends on what type of lettuce it is -- part of the issue is that if the lettuce is touching plastic, it will rot quicker, so I wrap it in paper towels, then bag it (but not sealed), and keep it in my crisper.

For whole heads of lettuce (iceburg, butter, red leaf, etc), I just wrap the whole thing in dry paper towels, then shove it back into the bag from the grocery store or farmer's market. I then pull off leaves as I need it, and re-wrap it. It stores for well over a week this way.

For mescalin mixes, arugula, or other individual leaves, I'll wash them, dry them, then unroll enough paper towels to spread the leaves on, then roll up the whole thing, and bag the roll (again, not sealed), and keep it in my crisper. I can probably get a week out of it this way.

(all times assume you're not buying from a store where it's been sitting on the shelf too long before you buy it; I get my lettuce when I can from the local farmer's market)

So, to answer the specific questions:

• keep the bag open; you don't want moisture to condense inside the bag, as it'll make the lettuce rot faster.
• I get better storage time with heads of letuce keeping them whole. If you're going to be eating it all within 2-3 days, it probably doesn't matter, and for loose lettuce, I find it more convenient to wash it as I re-pack it anyway.
• You never want to store lettuce wet ... you might be able to store it completely submerged, but damp will lead to it rotting faster.

I have just found the transcript of a Good Eats episode about lettuce storage. It's close to Joe's answer but they say the lettuce should be kept in an air tight bag with air sucked out.

In short they say:

• washed
• heads kept intact for delicate lettuce, cut is ok if hearty heads
• spinned dry
• wrapped in paper towel
• stored in air tight bag with the air sucked out

See senes 9-10-11 of http://www.goodeatsfanpage.com/Season1/Salad/SaladTranscript.htm

With lettuce, parsley, or green leaves in general, I care for three things:

Avoid mechanical damage

Even tiny fractures rot much faster, if the cell fabric is intact, it does a good job of preserving the lettuce. Specifically, this means:

• very careful handling when cleaning and taking apart the lettuce head
• use a box instead of a bag
• don't put too many leaves in one container, I typically use 3 boxes for a head of lettuce

Store clean

• rinse with cold water
• if stored longer, rinse again and use a fresh box after 4-5 days
• if stored longer, inspect the leaves and prune those that show brown spots (they can normally still be used for a salad right away)
• the best material for storage containers for almost any food is glass, it's the easiest to keep thoroughly clean.

Store neither too dry, nor too wet

• get rid of excess water after rinsing
• use an airtight container, so the leaves don't dry out (i. e. get limp)
• there should never be pools of water (not even tiny ones) in the container. If the lettuce is too wet, water will gather where the leaves touch the walls of the box.

I usually buy fresh heads of lettuce from local suppliers and prepare them for storage right after coming home. I can easily keep the leaves for a week and longer. In the winter, when the lettuce comes from Spain or France (I'm in Germany), the results are not as good, because the lettuce already had quite a journey. I then prefer field salad and the like, they are available locally way past December, and also store very well.

For a head of lettuce, I have a special Tupperware that is specifically designed for storing lettuce. It keeps the lettuce fresher longer! Definitely worth the money!