A while back I was talking to one of my neighbors and she mentioned that she had her water heater replaced. She said she'd been smelling "a damp, musty smell" in her hallway for a couple of days and then she noticed her carpet was wet. After a bit of investigating she discovered that her water heater had been leaking for some time until it finally soaked through to her carpet. This prompted me to go check on mine.
My water heater is pretty ghetto and I intend on replacing it with a tankless system once it finally goes out, or I save up enough money to do it voluntarily, whichever comes first. In the meantime I've gone to Home Depot and purchased a water alarm for around $12. It's a little box than runs on a 9 volt battery and has a wire with two sensors on it. If water completes the circuit the alarm will sound. You can actually test the circuit by touching it your skin (it doesn't shock.)
Now I can sleep just a little bit better at night.