>> The simplest method to reduce the power consumption is by passing the voltage regulator in the Arduino board.
Buy a separate boost regulator circuit and connect its output to the 5 volt pin on the Arduino board, which bypasses the 5 volt regulator on board.This procedure is used in our project.
>> using a "bare bones" board instead of arduino board.
>> Disable the unnecessary led
>> If you do not need time accuracy, then use the Atmega 328 internal 8MHz crystal instead of a external 16Mhz crystal.
>> Operate Atmega 328 at 3.3V instead of 5V
>>Turn off sensor as soon as possible
To know more details on arduino power saving techniques click here
The maximum power saving is done by using a Bare bones board.By using a bare bone board the power consumption can be reduced to micro amps level during sleep period.You can see the above figure.
You can easily make this on a bread board by following the links bellow :
1.Arduino on a Breadboard
2.Arduino to a Microcontroller on a Breadboard
Make bare bone pcb board by following the links bellow :
Single Sided Really Bare Bones Board Arduino in EAGLE
I will highly recommend for the bare bone board for any battery driven projects ( like sensors).