Our house is located on a hill approximately 150 feet above the elevation of the water main. The water pressure seems fine most of the time. But at times, our water pressure is too low. If someone is taking a shower and the washer is running, it takes forever to fill up the washer and the water dribbles out of the shower head.

1. What is the best way to increase the water pressure? We could run a bigger water line to the house. But the distance between the house and water meter is about 300 feet which would make this option quite expensive.

One of our neighbors told us about some type of tank that we could install that helps increase the water volume when needed. It could be installed in the garage or in the crawl space under the house. But he was unsure of what it was called.

2. What is the best method of measuring the water pressure where the water enters the house and on the second story?

Thank you."

You don't have a problem, the city does. You can't increase what's npt there ton be increased. If the city main loses volume and pressure You can't pull more water out of the main then the city sends you. Adding a booster pump would boost vpressure until you ran out of volume and the only way to increase the house volume is to increase the size of your water service but even that wouldn';t help if the city can't supply the necessary volume and pressure.
Your system's normal. Are there any more houses on your water main that have the same problem? Have you contacted the water department and informed them of your problem?
What the city does to remedy a problem such as yours is to increase the main pressure up high enough to reach the last house on that main. This means that the houses downstream of the last house must install Pressure Reducer Valves to bring the pressure down to a useable PSI. There is no magic tank that will increase pressure, that takes a booster pump. If you haven't already contact the city and tell me what they say. Good luck, Tom

In addition to Tom's advice...

Let's see if we can get more info from you regarding your plumbing system.

First, go to Home Depot and buy Pressure Gauge. Measure pressure at the point where water main reaches house. Also, measure pressure on the bottom of the hill, at the water meter. Post these two readings.

Second, tell us what's the size of your water main and the exact developed length bet. Meter and the house.

Third, tell us what size of pipes are there in your house. Also, how big is your house ? How many bathrooms ? 1 or 2 stories ?

There are few ways to help your problem. By knowing the info above, we can better evaluate your situation and offer solution.