Correct way to check transmission fluid level?

Depends. Manual or Automatic?

If you do have a dipstick:
Park your car on level ground and start the engine, leaving the gear in neutral or park. Wait for the engine to warm up. Unless your owner's manual directs otherwise, allow the engine to continue running throughout this procedure.

If the owners manual suggests otherwise, would certainly follow that criteria. If you do not have the owners manual, you can run a search on google and find the manual in .PDF format.

Automatic: do as alabare says. Check the transmission fluid when it is warm, the lever is in park, and on level ground. Also, you might want to wipe it down with a clean rag and take a second reading. Also, smell it. ifit smells burnt, visit a mechanic.

Manual: There is no dipstick, you have to have a mechanic check it. Same goes for the fluid in the rear end (if vehicle is a rear wheel drive), a mechanic has to check it.