When you take the runway for takeoff, turn your transponder to the ALT position, which enables it to respond to both Mode A and Mode C interrogations. Even if you don't have an altitude encoder installed, you should operate your transponder in the ALT mode. If your transponder was in STBY, you can just switch it to ALT and there's no foul. This enables it to respond to Mode A interrogations but prevents it from responding to Mode C ones. Controllers sometimes use this to help find your target, or to make sure the target they think is you really is.
Modern transponders are fairly reliable.
They do have a couple of expensive parts, however. You might recall from your private pilot groundschool that pressure altitude is what the altimeter reads if you set it to 29.92 In. Because the transponder reports pressure altitude, the altimeter setting that you dial into your altimeter's Kollsman window has absolutely no effect on your Mode C altitude reports. That's why it's important always to make sure your altimeter is set to the altimeter setting that ATC gives you from time to time. That way, the controller will be seeing the same altitude that you're seeing.