It's best if they are rear facing until they outgrow the maximum rear facing limits for the car seat. For example, a Britax Roundabout goes rear facing from 5-33 pounds or until there is one inch of space between the top of the head and the top of the car seat(the hard shelll, not the cover). The weights vary on different seats, but the height requirement is the same. So a child who uses the Roundabout should be rear-facing in it until they are 33 pounds or reach the height limit I mentioned.
http://www.cpsafety.com/articles/stayrearfacing.aspx
This site has great information about why it is so important for kids to be rear-facing.
Janice, car seat tech