I'm following this rigging tutorial. Everything worked perfectly until 10:40, where the uploader asks to set parent with automatic weights. This completely deforms the mesh, as shown below.
aa http://dl.dropboxusercontent.com/u/62862049/Screenshots/023.png
bb http://dl.dropboxusercontent.com/u/62862049/Screenshots/024.png
What is wrong?
First of all try to align your bone. It can help a lot for a better rig. For doing that follow this step : show the axes of your bones, enter in the edit mode of your rig and align your bone with the roll property on the right pannel of the 3D view. You can see an exemple in the screen below!
Now you can do your automatic weight. I looked a bit on your rig and apparently you played a bit with it. You have to reset all the roation of your bone in pose mode.
Go in pose mode, select all bones with a and types alt+r.
And now you have to play a bit with the pole angle of your IK modifier for align all your bone. 
Normally with this 3 tips your armature has a better set up.
I watched the same Tutorial ( https://www.youtube.com/watch?v=cGvalWG8HBU&index=54&list=WL ) and spent days and many hours trying to figure the same problem out. I am a noob and this was my first rigging so that didn't help either. What fixed the deformation for me was making sure the joints (Elbow, Knee etc.) were bent (even slightly) in the direction they are intended to bend. When you parent the mesh to the bones with automatic weights or any other way with the pole targets set the mesh deforms. This deformation does not happen until the pole target is set though. In that tutorial they are set before the parenting of the mesh. This is because blender (I don't why) turns them off target which twists the mesh in the direction blender turned them. You correct this by changing the pole angle in the bone constraint menu to the correct position. This lines up the mesh and the joint. The mesh is twisted back to its correct position and the joint bends in the correct direction. Now if the bones are straight (my problem) or bent in the wrong direction no matter what you do (line up the bones axis or try to correct the pole angle) the mesh will not be corrected (not deformed) if the joint is in the correct position. Even if you have everything already set up ( mesh parented to the bones, the IK constraints, etc.) you can go into edit mode, position the joints in the correct direction by clicking on the ball between the bones where the joint bends and move them into he correct direction. Go into pose mode click on the bone that has the IK constraint go to the property panel click on the bone constraint tab (little bone with the chain) and change the pole angle till the mesh is perfect. You can hit the tab button to go back and forth from edit mode and pose mode to see if you have lined up the mesh correctly with the pole angle.
I know this post is coming in a bit late, but if anyone else stumbles upon this issues and is looking for a solution and they happen to be making a character for a game this post might help. I was creating a character to put within UE4(Unreal Engine 4) and I continued to get the same issues that these gentlemen were getting. But you cannot upload a character mesh into UE4 with the IK bones, or the knee and elbow bones. So if you go ahead and un-parent the armature from the mesh and delete these outer bones and then re-parents the armature to the mesh I found that I had no issues with the twisting and turning on my character. All the bones bend perfectly with no clipping issues. Hope this helps someone!
Instead of doing all that difficult stuff other mentioned, just make sure your armature in edit mode is absolutely symmetrical. I'm not sure why, but sometimes when mirroring, armature gets rotated slightly which messes up all further actions so you shouldnt "mirror" armature with shift+d -> s -> x -> -1 instead use mirror by axis (not really sure but its alt+m -> axis or smth similar)
