In my modest opinion!!!
I would not design for monitors larger than 1024x768.
There really are many of them still about.
That implies that the width of content should not exceed about 980px, allowing for chrome and scrollbar.

"Which size do you design in,"
Using and analyzing the web statistics/reports, I look at what the average screen sizes are. (i.e., Google Analytics)

"and why if you do not mind me asking?"
Because statistics are pretty self-explanatory.

Instead of using width, I use max-width and min-width.

1024x768 is a pretty solid answer, however this will change shortly no doubt. One huge thing is, you really have to know who you are designing for. For instance, if you're designing for a corporate/government intranet...you may know what the common screen resolution could be (ask the IT folks). Most users in that environment are apathetic to screen sizes, they will stay with the default. My real world example that I encounter every day is designing sites for government intranet. The branch of the military I work with has a "standard desktop environment". This is just slang for them "controlling all the software, resolution, etc. on your computer/screen". Users are basically locked into 1024x768. But, anyways, I digress. As I stated earlier, do your homework before you begin. 1024x768 is typically fine, but sometimes you can go larger/smaller based on your audience.

I used to design my sites in an imaging program(cant say the name it wasnt legal:P) and I mostly just drew a box with a slice tool until it looked nice and suitable for most resolutions, but I've been experimenting with css designing lately and discovered that I can make sites just as pretty with just css on divs and tables etc.
so I've set a new standard and thats just a div(or something like that, maybe body or table) 100% high and 100% wide and set margin so that it kind of looks consistent in different sizes and fits evry resolution, and of course there is a min-width and min-heigt, and sometimes the width is prefixed and that mostly is 800px wide ecample(dutch). so thats how I make my sites.

I typically design for 1024 resolution as well -- very bad practice to go above that.

And a width optimized for a 1024 browser typically has a maximum width of 996px -- I typically work with 990 as a nice round number that is easily divisible by 9 -- some like 960px as it divides nicely by 12.