I've always done what you did the first time. Grabbed their hand gently and said "No hitting, it hurts Mommy!" in my sternest, but not angry, Mommy voice. It takes a few times, but they learn eventually. I've always noticed that they usually hit when they're tired or hungry and you're just ticking them off somehow. Grumpy + immature impulse control = violence. So, I've never actually given them heck for it, just stated that it hurts emphatically, and made them stop. (On the plus side, this is the beginning of teaching then about empathy and impluse control so they turn into decent human beings!)

On the more manipulative side, my 18 month old has discovered that if he pulls his sisters hair when she's holding something he wants she'll drop it, so a week ago she and I decided that when he does that she'll get up in our big chair that he can't climb into yet and look at her books. He hates it when she won't play with him, apparently has put 2 and 2 together, and the hair pulling has almost come to a stop. (Once today, once an hour this time last week.)

They're smart little imps arn't they? And they do learn quickly for somebody who hasn't been at this getting along with other people thing for very long.

This is an important age - I know parents who have let it alone, or made light of it and had ongoing problems with it as their child grew older.

Every one of our children have been different in this regard. While we've tried a few things, they all tend to revolve around a few actions/concepts that we found helpful:

• Express unhappiness with their action.
  
  • For example, with an obvious hurt look on face say, "Ow! That hurt!"
  • They key very well on body language, so it's important to use body language as part of your communication.
  • Don't delay this reaction - they will figure out when they can hit you and get away with it, and if the reaction is separate from the action, then they may not fully associate their behavior with your reaction. Hitting you while on the phone to see if you'll give up your conversation to punish them is a family favorite...
• Remove them from the situation.
  
  • We'd set them on the couch, chair, or if it's a repeat offense the bottom of the stairs (our time-out spot) and take a step away and sit at their level so we can talk without them simply hitting again.
• Tell them you understand their frustration, but you can't help them when they hurt others.
  
  • At this point we explicitly acknowledge that they are hurt, frustrated, or sad, and ask for their confirmation about their emotions.
  • Then we explain that even in those situations they aren't allowed to hit, bite, scratch, pinch, etc.
  • We tell them we love them, and we love the person they hurt, and it makes us sad when they hurt others.
  • We keep it short (it's not a lecture)

Again, the things you do for each child, and how you apply the above might be different, but those tactics seem to work fairly well for us.