Setting Pinion Angle
Pinion angle is the relationship between the transmission centerline and the pinion centerline, not to the driveshaft and not to the ground.
Ideally, the pinion should become relatively parallel to the transmission as the pinion wraps up under power. This is how U-joints are designed to run.
When the vehicle is resting on its suspension, make the pinion parallel to the transmission as a base line, then tip the pinion downward 2 degrees (for a street car). This is referred to as 2 degree negative pinion angle.
As a rule of thumb, I don’t like to run more than a true 4 degree negative pinion angle.
For a more complete description with pictures, see here: http://www.moparts.org/Tech/Archive/axle/8.html