This is a popular topic and there are dozens and dozens of good articles online. It's an area that doesn't go untouched when talking about  work flexibility. So sharing here my own perspective and experiences on the same.
'Kids' are one of the top reasons for anyone to practice working from home. If you are a parent (whether you work full-time, part-time, flex hours, etc.) I can guarantee that at some point or other you would have had to work from home either for a few hours, a few days or even permanently.
If you have tried working from home with kids running around, you would know how challenging it can be :) So how can you make it work? Here are a few tried and tested tips to help you to succeed. But please do keep in mind that the below is suitable only if you have flexibility for work hours and times. If you are telecommuting full-time and need to work business hours then the strategies will need to differ.
Dedicated Work Hours
We need to adjust our work schedule around the kids; After all you decided to work from home because of the them right? Schedule your work during the kid down-times. If they are schooling (you are lucky) use that time they are in school to get most of your important/critical work tasks done. If you have younger kids, learn to capitalise on their nap times. If you have a couple of kids or more in various age groups, then it becomes more tricky. In such a situation its best to schedule your key work hours either for the early mornings or the late nights. Instead of making your children conform to a schedule that only suits you, look at how best their schedules can accommodate yours. Whatever your situation might be, find and dedicate some fixed hours for your work each day and stick to that routine.
Plan Ahead
Planning ahead is the next most important thing when you want to successfully work from home with children. When it comes to work, try to always work ahead. Don’t wait for the last-minute to meet your deadlines as kids are unpredictable and emergencies can come up when you least expect them. Plan ahead on household activities as well. Have dedicated days for grocery shopping, laundry and even house cleaning. Plan ahead your weekly meals or even prepare them in bulk. If you don’t have any extra help at home, this is the only way that you will be able to manage all aspects (house, kids, work) without creating chaos.
Seek Support
Engaging others to support and help you is also necessary if you want to be able to successfully work from home with the kids. Share kids and house duties with your spouse; this will cut down your load by half, cut your stress levels and give you time to focus on your work. Get help from grandparents to babysit the kids once in a while, so that you can meet key work deadlines. It's also advisable to use a nanny/baby sitter/childcare maybe for a few hours a day, a few days a week. This is a good idea if you have young kids (infants or toddlers). Having at least 8 - 10 uninterrupted, kid free hours each week for your work can do wonders to keep the balancing act going smoothly. Get some help for household work. This is something that can work out well in countries like ours (Sri Lanka) where domestic help is still easily available and affordable. Unfortunately it will not be the same in other countries.
Work Mobile
One thing work at home parents must master is the ability to work on the go. If you need to take your kids for extracurricular activities make sure you always carry your laptop or tablet or smart phone. While the kids are engaged in their activities carry out some work tasks from your car or nearby coffee shop. Sometimes kids just need to get outside and have some fun, so take them to a nearby park or play area. Let them enjoy the new environment while you catch up on some quick work from a quiet corner. You can still overlook what they are doing. This won't work if you have young kids who needs to be monitored always, but works great for older kids.
Special Work space
One of the musts for anyone who works from home, is a dedicated work space. Wherever it is or how big or small it is doesn't matter. What matters is to have this defined space for your work which help set boundaries with your family, especially kids. It is not a must that you use this work space for work at all times, but definitely its best to use this space to carry out bulk of your work. Set up some ground rules with the older kids involving your work space. i.e. when mummy's in her office she mustn't be disturbed unless for something important. when mummy's on the office phone there should be no shouting or screaming and so forth. For the younger kids, you can setup their play area in a quiet corner near your work space and fill it up with their favourite toys. Ensure the play area is child safe so that you can focus on your work without much interruptions. This way you can get on with your work (even for an hour or so).
Working from home with small children is hard, but completely possible if you try these tactics. These have worked well for me over the years. These ideas will improve your work productivity, and make room for more quality time to spend with your family.  With these know-hows and some personal discipline, definitely you can Make It Work.