I see many companies using social networking (Twitter, Facebook etc) to promote their products and services. I've never used sites like this, and don't really know where to begin from a marketing perspective.
What is the best way for me to exploit social networking to promote my small software business? (We sell a niche enterprise level application)
Check out Hubspot.com. Dharmesh, one of the hosts of this site, is a co-founder. The Hubspot website has a lot of useful marketing information, including free whitepapers on how to leverage Facebook, Twitter, and LinkedIn for your business, and lots of webinars.
Update: They posted a new eBook, How to Use Online Video for Marketing.
You ARE in a social website already.
Other websites like Facebook or LinkedIn are very similar to this one. They connect people that have the same interests and that want to discuss them with their peers.
One good place to start looking at would be LinkedIn.
There are thousands of LinkedIn groups where people meet to ask questions and find help.
You'll most probably find several groups where your prospects meet.
Joining these groups is free (although some are by invitation only).
Once you are in the group, you need to take a 3 step approach (which, by the way, applies to any social media site):
1) Start to listen to what others are saying, what questions they have, what they discuss..
2) Get involved, answering their questions, without pitching anything. Build a reputation. Help others. Make connections. Build your network.
3) After a while, people will start knowing who you are. At that point, it is ok to include a non-sales pitch in some of the answers, always making sure you explicitly say that "this is the company I work for, this is my product".
Hope this helps