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All those mysterious little sharps and flats sitting in the key signature are way easier to understand than it looks like.  Let me give you the tricks to understand the system and make you a more informed guitar player.

First of all, remember that music notation in general is a just a set of instructions for playing the song.  Learning to read it is just like when you were learning to read books back in second grade.  It takes a little time, but quickly becomes very natural if you know a few tricks.

They key signature is there to tell us which notes in the scale are sharped for flatted.  From that you can tell what key the song is in, which gives you additional information before you even start playing.

The key signature can contain anywhere from 0 to 7 sharps or flats.  You’ll never see them mixed.  Just one or the other.  The sharps and flats are placed on the line or space of the note that they correspond with.  So if you see a sharp on the top line of the staff that tells you that you’re going to play F# every time you see an F in the music.  If you see a flat on the middle line of the staff, that tells you to play Bb wherever you see a B in the music.  

Why do they do this?  There’s two reasons.  First, some keys have a lot of sharps or flats in them.  Without a key signature we’d have to write that sharp or flat next to the note every time it comes up.  That would make the notation really messy and much more difficult to follow.  Second, when our current system of notation was invented (in the 17th century) ink and parchment were very expensive.  And the poor monks who were hand copying all this stuff looked for any shortcut they could to save time and ink.  Key signatures are a big help when your hand is cramping up from writing a zillion sharps.

The sharps and flats come in a particular order:
Sharps: F  C  G  D  A  E  B – sharps appear in an order of 5ths
Flat: B  E  A  D  G  C  F – flats appear in an order of 4ths.

If you have two sharps in the key signature they will be F# and C#.  Three flats will always be Bb, Eb, and Ab.  You’ll never see something like two sharps and they’re D and E.  Won’t happen.

Now you know how to read the individual sharps and flats in the key signature.  How do they tell you what key you’re playing in?  First let’s clarify the concept of “key”.  The “key” simply tells you what scale the composer used to write the piece of music with.  Think of a scale like an artist’s palate of colors.  He has blue, red, white, black, purple, etc.  And mixes those colors and throws them at a canvas to make a painting.  We take the seven notes in our scale and throw them at the page to make music.  

There’s a couple quick tricks to tell what key you’re in based on the key signature.  For sharp keys, take the last sharp and go up a half step (one fret) and that’s the name of your key.  So if you have four sharps (F#  C#  G#  D#), the you go a half step up from D# and find you’re in the key of E majaor.  Simple!

For flat keys you take the second to last flat and THAT is the name of your key.  If you have 3 flats (Bb, Eb, Ab) then you’re in the key of Eb.  The key of F major, which has just one flat – Bb – you unfortunately have to just memorize.

And the advantage of knowing what key you’re in?  You’ll be able to know some of the chords you’ll see before you start playing.  Primarily the I, IV, and V chords which you’ll see in nearly everything you play.  

Let’s say you have a key signature with 4 flats in in.  Look above to see what those are…. (Bb Eb  Ab  Db) – If we look at the 3rd flat you’ll find you’re in the key of Ab major.  In that key your I, IV, and V chords are Ab, Db, and Eb7.  Now you know you’ll be running across at least those chords.

So, the key signature gives you a lot of information right off the bat to help you get through the song.  And now you’ve got all the tricks to figure them out.  And you’re a better guitarist because of it!

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