The first and most important thing is to rid your mind of any preconceptions you might have about grading practice and assessment. This is particularly important if the only experience you have had is with traditional grading systems.
SBG should not be about a "grade", it is never about whether the work or the assignment was done, or completed, was late or was lost, it is always about what the individual student understands at any given point in time. It isn't about effort or how hard a student tries, it is never a reward or a punishment. It isn't about building character.
A student's understanding of a specific item should change over the course of the school year, or the unit. Typically the understanding would follow a path from not knowing to becoming proficient. The standards for each class are the same throughout the year, but the specific learning targets change with each unit. These learning targets are subsets of the broader standards.
Learning goals or targets for each unit are best offered to students as "I can" statements and although they are based upon the state or national standards, they should be translated into more specific goals that fit your curriculum.
Remember that learning goals are the reason you are teaching the unit. What do you want the student to learn? This shouldn't be a broad and generalized goal, such as "to read" or "vocabulary" but specific such as "I can cite two examples from the text to back up my idea".
It is important to separate out the learning goals (which are the ends) with the activities (which are the means to the end). The activity is not the assessment, the activity is where the student constructs their understanding of the unit. It is through working on activities that the student is able to demonstrate their understanding of the learning targets.
Think of it as "doing" and "understanding". The activity or project should not be something tacked on to do at home or after the learning has been done through notes or readings. Students demonstrate their understandings as they work through activities and projects. Understanding develops and deepens over time, practice is what allows for this.
Assessment is when the teacher is checking for understanding. Assessment can be in many shapes and sizes, but it is important to note that you are assessing individual learning targets and NOT the assignment or activity. Mastery is something that is measured over time, a student choosing the correct answer on a multiple choice test is not mastery.
The teacher should offer multiple opportunities for students to demonstrate their understanding, but this doesn't have to be retaking tests and reassessing homework, it should be built into the activities of the unit and can sometimes be as simple as observation or asking questions while the student is working.
One of the most important aspects of SBG should be how it can put the responsibility of learning onto the student. There needs to be a continuous dialogue in the classroom as to what it is you want the students to be understanding and what ideas they should be exploring. Students should begin to develop strategies for being able to demonstrate their understandings to teachers and teachers should realize that activities and projects can and should take many physical forms. When students begin to design what their projects look like, they being to internalize the understanding of the learning targets in a much deeper and richer way.
Disclaimer: I wrote this in preparation for a short P.D. presentation at my school. This is my take on SBG and many of my thoughts are based on several readings (particularly Robert Marzano), several EdCampNYC sessions attended and discussion via my Twitter PLN. I welcome any deeper or further discussion on this subject and realize there are many strands of thought to this subject.