The American Academy of Pediatrics came out with new carseat recommendations. Basically, the advice is to keep children rear-facing until age two, or until they've outgrown the manufacturer's limits on height and weight for the particular carseat.

However, if you are using an infant-only, rear-facing seat and your infant has outgrown the limit for it and is under age two, then you should get a larger, convertible seat which can remain rear-facing until age two. But if your toddler has also outgrown the rear-facing limits of this larger type of convertible seat, then they can use it facing forward even if under age 2.

They also give advice on when to transition to booster seats and regular seat belts.

See these links for more information and details:
AAP's article for parents
AAP's details on recommendations for parents