Goodwill is added to the assets side, particuarly non-current assets. It's typically subtracted out when calculating tangible book value. And it usually has its own line. See IBM's Balance Sheets for example. Year end 2009, IBM had $20B in goodwill.
From what I understand, it's often added due to a merger. If IBM buys, say, ABC, they will either reduce their cash (decreases assets), issue debt (increase liabilities) or issue stock (increase liabilities). Since the business it purchases is more than just its assets (it has a brand name, customer base, etc), IBM will pay more for it than what its assets are worth. That additional payment (to keep the balance sheet balanced) gets thrown in on the asset side as "good will" since the balance sheet has to balance (otherwise the name wouldn't apply.)
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