Measuring community websites and user engagement is definitely one of the hottest topics over last half year. Nielsen and Comscore changed the way how they measure user engagement - Counting time spent instead of old-school "Visitors" . Ryan of Websocial Architecture has another approach:
"Return Visitor Sign-In, Not New User Registrations
Sign-in is more important than return visit--it's even more important than registration. Participants in online communities typically register to access content they can't access otherwise, to take an action they can't take without registering, or to streamline a future process (e.g. saving credit card information)....
Qualified Content Consumption, Not Number of Posts
In short, content consumption tends to be greatly undervalued relative to content creation. While content creation introduces the potential for value, content consumption represents the realization of that value. Tracking content consumption, then, helps you learn not just how much stuff you have, but, more importantly, how good is your stuff."
Here his entire blog entry.