In most cases, siding should be installed level. On new homes, this is seldom a problem — you just snap a level line around the house by measuring off the foundation sill plate. But older homes can present a challenge. The foundation may have settled, or a cobbled addition may be seriously out of level. Start laying out courses at the lowest spot on the structure, and use a transit, water level, or line level to establish ground zero. Measure up from this low point, and make a mark that represents the top of the first course of siding. Carry this mark around the entire house, and use a chalk line to connect the points. Foundations that crowd too far up into the siding can present problems when it's time to apply the siding starter strip. If the foundation wanders away from the siding plane (a stone foundation, for example), a plywood nailing band can be installed to extend a nailing base below the top of the foundation (see Figure 1).
Siding should be installed level. When foundations are out of level, extend the nail base with a piece of plywood that matches the thickness of the existing siding.
to read the full article.