Watch the Use Hammer-Ons and Pull-Offs online guitar lesson by TrueFire from Rhythm Guitar Greatest Hits Vol. 1
Make sure you understand AND can execute the techniques here before you start trying to incorporate them into your playing.
For the hammer-ons to really sound, you have to make sure you are bringing your left hand finger to the fingerboard with a fairly strong touch... or else you just won't hear the note. For pull off's, the trick is to get that 'pulling' movement strong, yet controlled so that you don't end up hitting the strings below and making them sound as well.
Other than that, deciding which notes and strings to hammer and pull is really up to you – what you like and what your fingers can reach! Explore!!