I keep hearing that you have to praise children all the time to build up their self-esteem.  Is that right?

Most psychologists would point out that praise serves to strengthen the praised behavior.  So, if you praise mediocre performance, you should expect to get mediocre performance. 

Because children understand language, however, parents can make effective distinctions about what they are praising.  Even though the child does not succeed, a parent might praise the child:
for trying,
for improving,
for a well-done part of the task, or
for a good bounce-back. 

It is important to be sure that the child understands what behavior is being praised.

If you expect your children to be able to deal with failure, you will probably do better by them if you let them fail while you are around to give them support and guidance.