Most birds hunt mainly by sight. As a group, birds have very well-developed vision -- most birds have very poor senses of smell, however, and don't use this sense for hunting. Exceptions do exist, though, and a few species of carrion birds use their sense of smell to locate food.
As a general rule, most birds have a well-developed sense of sight. Their eyes have much in common with mammal eyes -- both of which are derived, evolutionary-speaking, from reptile eyes. Birds of prey, and even some herbivorous birds, have eyes that can focus well on distant objects. At the same time, most birds have an atrophied sense of smell. In flight, a sense of smell does not do much for a bird, since prey is probably distant enough that smell would not reveal it.
Raptors, or birds of prey, use their exceptional sight for hunting. Their eyes allow them to focus tightly on distant objects. Some raptors take this even further. For example, owls not only have exceptional vision, but exceptional night vision. Additionally, some ospreys' eyes have built-in polarization, which allows them to spot fish through water. Owls may also use their sense of hearing for hunting more than other raptors; their distinctive head shape and ear tufts are designed to amplify sound just like a human's outer ear.
Poor Sense of Smell
Most birds have a minimal to nonexistent sense of smell. However, some birds turn this into an advantage. For example, an owl's lack of olfactory senses allows him to hunt skunks. Skunks have so few predators because of their foul scent glands, but they have little to no effect on owls.
Carrion birds do have well-developed senses of smell, which is unusual for birds. Vultures and their relatives have a sense of smell comparable to that of dogs. These birds have an exceptional sense of smell, which they use to locate dead and dying animals. Smaller scavenger birds may follow them around to exploit this, relying on both the vultures' sense of smell to find foods and their sharp beaks to cut through tough hides.