I spend a fair amount of time reading books and then applying the reading to personal coding projects. Typically I have used these projects to learn a new technology. Recently I've started working through Dave Thomas's Code Katas. From Dave's Code Kata website:
Code Kata is an attempt to bring this element of practice to software development. A kata is an exercise in karate where you repeat a form many, many times, making little improvements in each. The intent behind code kata is similar. Each is a short exercise (perhaps 30 minutes to an hour long). Some involve programming, and can be coded in many different ways. Some are open ended, and involve thinking about the issues behind programming. These are unlikely to have a single correct answer.
So, again, what are you doing to practice software development?