The seat must be designed for use rear-facing and must actually face the rear of the vehicle.
Be sure you check the labels and manual for the seat to find out whether the seat can be used in the rear-facing position. If the seat can face backward and forward, be sure you locate the belt path that is required for rear-facing and use it. Infant seats, those that double as carriers, can ONLY be used in the rear-facing position and should never be used forward-facing.  For infant seats with a base, the vehicle's seat belt must thread through the belt path on the base, not the belt path on the infant seat.  Only use the belt path on the infant seat if you are using the seat without the base.  All rear-facing seats should have a label indicating that it meets motor vehicle safety standards.

The seat must be tightly installed in the vehicle.
After installation, grab the seat at or near where the car's seat belt threads through the car seat belt path. Give a firm tug, not a yank, from side to side, and from the back of the car towards the front.  The seat should not move more than 1 inch in either direction, and preferably as little as possible, or not at all.  A rear-facing seat will have normal movement throughout the top of the seat - towards the back of the car and from side to side. This movement is part of the seat's safety design, and should not be a concern.

The seat must be reclined at no more than 45 degrees
For newborns, a 45 degree angle is necessary to keep their air passage open. For older babies that are able to maintain head control, a more upright position is okay. Although some seats come with "level indicators", these are not always accurate due to any incline the vehicle may be on. If you use the built-in level indicator, be sure the vehicle is parked on a flat surface (even your garage floor has a slight incline). An easy way to check for a 45 degree angle is to take a piece of paper and fold the shorter top edge over to meet the longer side edge. You'll get a triangle with one long side. Place the longest side of the triangle against the seat where baby's back normally rests. The top of the paper should be parallel to the floor of the car.

The safety harness must fit the child snugly.
"As snug as a hug" is a good guideline. You don't want your child to have problems breathing, but a too loose harness could have devastating results. Many instruction manuals suggest that only one or two fingers fit under the harness at collarbone level, but this could be too loose, depending on the size of the fingers. Instead, use the pinch test: grabbing the harness at shoulder level, try to "pinch" the harness together from top to bottom. You should not be able to pinch a vertical fold on a snug harness.

The safety harness must be in the slots that are at or below the child's shoulders.
In a rear-facing seat, the harness will hold the child down and in the seat in a crash. The harness must be at or below the shoulders to do this properly. If the harness is above the shoulders, the child can "ramp up" or rotate toward the top of the seat, exposing the head and neck to possible injury.  For newborns and very young babies, the bottom harness slot may still be above the shoulders.  As long as the harness is in the bottom slots, and the harness is snug, this will protect the baby.

Chest clip must be at armpit level.
The chest clip is designed to keep the harness straps properly positioned on the shoulders before a crash.  This clip is ONLY for pre-crash positioning. A chest clip that is too high may interfere with the child's ability to breathe. A chest clip that is too low could allow the straps to slip off the shoulders before a crash, leaving the child free to slip out of the seat.

The carry handle must be in the correct position, usually either curved around the top of the seat or under the seat.
Many people mistakenly think that the carrying handle will perform as a "roll bar" in a crash, but in reality, most handles are not designed to withstand the force of a crash. Upon impact, the handle can shatter or break, sending sharp, jagged pieces towards baby or other occupants in the car. CHECK THE INSTRUCTIONS.  Most seats require the handle to either be around the top of the seat or underneath it.  Only a few seats allow the handle to up over the baby during travel.

NEVER place a rear-facing seat in front of an active airbag.
The airbag is protection designed for adults, not children and especially not babies. The rear-facing seat sits too close to the airbag, and when it inflates, it does so rapidly and violently, causing massive head and neck injury. EVERY REAR-FACING CHILD WHO HAS BEEN IN FRONT OF AN ACTIVE AIRBAG IN A CRASH HAS BEEN SERIOUSLY INJURED OR KILLED!!!

The back seat is the safest place.
This doesn't just apply to rear-facing seats. Everyone would be safer in the backseat - in the middle, if possible. The back seat is safest because it is farther from any point of impact. A front seat passenger is 30% more likely to be injured or killed than a rear-seat passenger.  Use the back seat position that offers the best installation.  A good fit in an outboard position is safer than a poor fit in the middle.
*NOTE* In mini-vans, the safest position may be in the MIDDLE seat, as the rear has less "cargo space" to absorb a rear impact.

Avoid using add-on products
Anything that did not come in the box with the seat could potentially put your child at risk. Adding strap covers could cause the chest clip to be positioned incorrectly. An added head support cushion could compress in a crash, introducing slack in the harness and allowing the child to be ejected from the seat. In general, you want nothing under baby or between baby and the straps that is any thicker than a placemat. Adding NOTHING under, behind or between baby and the straps is the best. Also, keep in mind that any product you add that is not included with the seat can release the manufacturer from being responsible for any injuries your child may suffer in their seat.

The child must fit properly in the seat
There are several conditions that must be met for a child to fit correctly in the seat.

A child is too small for the seat if:

• The child weighs less than the seat's lower weight limit.
• The harness can not be adjusted to snugly fit.

A child is too large for the seat if:

• The child weighs more than the seat's upper weight limit.
• The top of the child's head is less than one inch from the top of the hard plastic shell of the seat.
• Some manufacturers used to state that the child must use a forward-facing seat when the child's feet are touching the vehicle seat back.  All manufacturers have now removed these instructions, as there is no real-life data to suggest that the feet touching the seat back would cause injury, but there are cases of children who have been turned forward-facing too soon and suffered life-threatening or fatal head, neck and spinal cord injuries.

Used seats may be dangerous
Never use seat that is damaged, under recall*, over 5-6 years old, or has an unknown history. Check out Not New? for more information on any seat that is not brand new before using it.
*Some recalls do not affect the safety of the seat (for instance, a recall on the handle of the seat when used as a carrier), and the seat may safely be used to transport your child until the problem is fixed.  You will need to contact the manufacturer to find out whether any recalls on your seat must be fixed before using it for transporting your child.