Here's a basic template for a physical computing project journal. Feel free to copy the source code for this web page and use it for yourself.
Not all of these issues may be relevant to every project. If you're attempting to understand the basics of an electronic circuit, for example, who the intended user is may be less important than what you expect to happen. The more fully realized and complex your project, however, the more relevant all the questions below will become.
In a simple project, some of these questions may be answered with only a word or two. But taking the time to consider the questions will keep you focused on the goal of interaction with a human participant.
For a larger project such as the midterm or final, consider and answer all of these questions.
What
What are you attempting to do in the project? What principles are you trying to understand or to put in practice? If you get stuck, or run short of time, revisit this statement. Ideally, it should remind you what's the most important thing to focus on.
Sensory description of what you intend to happen
Describe what it you're building. Walk through what should happen and when. Describe all the things a typical user of your project would see, hear, etc., and when. Describe how their action makes things happen. Don't get technical; concentrate on the participant's sensory experience. Describe as if you were describing to someone who doesn't know or care about the technology involved an intelligent but non-technical person. Pictures may be handy here.

In a more complex project, it might help to make a chart linking what actions initiate what behaviors: what input is expected and when, what output is expected and when, and how they are all related.

Who is it for
Whenever you create an interactive project, physical or not, you have an intended user in mind. Who is that user? How will their experiences, biases, expectations, height, weight, strength, etc. affect your work as designer and builder of the application?
Why will they be interested
Why would your intended user be interested in your application? What will they get out of it? What will make them keep using it? What makes it fun? Profound? Moving? This year's Killer App? the greatest thing since sliced bread? More fun than humans should be allowed to have?
How does it work
Describe the components involved at whatever level of detail is important to the principles you're trying to illustrate or learn about.
If your goal is to understand a simple circuit, you're going to describe the individual electronic components involved. If your goal is larger or more conceptual, you might only describe the technical system more generally: input devices, controllers, output devices, and how they are connected together.
Keep this simple, and to the point. If you can't describe it simply, you'll have a hard time diagnosing when something goes wrong.
System Diagram
Make a diagram of the system you're building. As with the technical description, describe it at a level that helps you to understand the principles you're looking to understand.

Details, solutions, and revelations
Include any details, techniques, or discoveries that you made in the process. Note things that will be useful for you (or someone else) to remember for the next project. Include any useful techniques or code algorithms, technical observations about how people use it that you didn't expect, shortcuts, etc. This will often be the longest and most useful part of your notes, on bigger projects.
Also include here a description of how the system as built differs from the intended system. It might lead to some interesting effects you hadn't expected, or it might lead to another project entirely.
Future Directions for this project
What would you do with this project if you had time to realize it more fully? Most projects in this class, and at ITP, are sketches for larger ideas; use this space to take notes on the more promising projects that you want to develop later on.
References and links
What resources did you find that helped you out on this project? List them for others to take advantage of as well. If they're web sites, include a link! Local businesses or experts, include an address or contact info.