Furniture, Wood and Cabinetry Finishing - chipped or worn paint

Is sanding the best way to "age" furniture? How should it be done? I am not looking for the crakle look, just worn away paint.

That depends. Do you want to use the existing paint? If so just sand areas a little in areas that normally would get worn. If you want it to look as if its been painted several times over the years you need to choose the colors you want to see. One as a base coat (it will be seen) and a top coat.
After you are done putting on the base coat (or if you use the color already there) rub some wax (candle wax is fine) on the areas that would get the wear & tear. Now paint on your top coat. The wax will keep the paint from attaching to the base coat allowing it to show through. You may have to use sand paper also to add more or remove the wax.