How the defender should position depends on who they are marking and where the receivers are standing. The defender should generally attempt to be between his receiver and the disc or at least in position to get there easily. That way the disc will have to go through, around or over him to get to the receiver.
Face guarding refers to defending by always facing the person you are marking and always trying to stay between them and the disc. They will usually run directly at you, trying to get you to turn away.
In face-marking, each defender stands about three metres in front of their man, facing them, and slightly to the forced (open) side. You should try to maintain a position which is in a direct line to where the cutter is trying to cut. You will need to back-pedal (run backwards) as the cut starts and the offensive player closes the gap between them.
You should remain facing your man until you hear an "up!" call, regardless of how many times the cutter dukes, fakes and baulks. Turning to look away from your man gives them the opportunity to get away from you. It is also a good idea to focus on the belly-button of the cutter, as this is the centre of mass, so that head fakes and leg fakes can be ignored. You should go for the lay-out block when the disc is thrown.
The problem with face guarding is that a disc can often come close enough to get a block on, but because you are looking away you miss the chance. Most defenders prefer to watch the disc as well as their man. This has the advantage that you are more likely to be able to get a block on the disc since you can see when it is thrown, but the problem is that you are not focussing all of your attention on the person you are marking. This tends to make it easier for them to get away. There are different levels of this sort of defence, ranging from the occasional glance toward the disc, to facing the disc and trying to defend by looking over your shoulders.
The most common is side marking, where the defender stands slightly on the open side of their man, with the thrower is almost directly to one side and their man directly on the other side. By turning your head slightly you can see both the disc and your man. The cutter will usually try and sprint past you on the open side, as this is the way to make you turn the most. You should be aware of this cut and try and position yourself so that the cutter has to cut through you to make it.
One of the other possibilities is facing the disc all of the time. This is very difficult to do well, and a good cutter will usually get free eventually. The aim is to watch the disc, but know where the cutter is all the time. This can be done by both looking and listening. Without looking at the cutter, it is possible to tell where they are by listening to footsteps, both rhythm and loudness, as well as breathing and any calls they are making. This information is combined with other clues, such as shadows (this is easy at night when the ground is lit), where the thrower is looking, and the occasional glance over the shoulder. If done well this can be very effective, although it is susceptible to a cut away from the disc, since you may only notice an absence of clues.