i use a khatmandu trekking tarp (1.8X2.4m IIRC) and just stuff it randomly into its stuff sack, i've got another stuff sack with lots of paracord for ridge/guy lines etc. i tie the two stuff sacks to each other and shove them into a space somewhere near the top of my rucksack, they fit nicely into the most awkward of spaces. they're not completely waterproof but they're just about the only thing in my rucksack that isn't so i don't worry at all about my tarp wetting any of my other kit.
all that said, whenever i've lent a tarp out to anyone else they've always done a lovely job of folding and rolling the tarp up and i'm always really surprised by how small it can be packed up
stuart