Software: Photoshop CS on a dime (3000 of them)

For digital photographers, there's no avoiding buying Photoshop CS. While there are some free software equivalents such as the GIMP (http://www.gimp.org/), the GIMP is 8-bit only and does not have color sync profile support on it -- making it nearly useless for professional photographers. On the Mac, the $30 GraphicConverter is very popular (and I still continue to use its batch processing functions from time to time), but is similarly 8-bit and non-ICC limited. Other commercial software such as PaintShopPro has other limitations that also make them difficult choices. At this point, Adobe has a lock on the professional photographer market.

That doesn't mean you have to pay the full fare of $600/copy though. Practically any scanner or digital camera you buy will come with a free copy of Photoshop Elements, the very limited version for amateur putzing. You can upgrade from Photoshop Elements to Photoshop CS for $300:
http://store.adobe.com/store/products/master.jhtml?id=catCanon

And if you're an educational user (teacher, student, etc.), you can buy the Photoshop CS bundle for about half-price. The same goes for Dreamweaver MX. You have to go through your educational software purchasing agent (i.e., I ordered mine through the college bookstore). There are some companies that purportedly will sell you at educational prices (such as JourneyEd.com) but I have no experience with them. You can also try calling up the usual mail-order suspects (MacConnection/PCConnection, MacWarehouse/PCWarehouse) and asking if they have an educational software sales division. You will have to fax in a copy of your student/faculty ID.

Update 2005.01.29: Many people think 48-bit color is unimportant because the human eye can't see more than the millions of color represented by 24-bit color. This is not the case. We can easily see more than 256 shades of grey so if you're doing B&W work, you want to have 16-bit grey support. 48-bit color (16-bit per channel) is crucial if you're doing any image adjustments such as black/white point adjustment, contrast changes, etc. If you have less than 8-bits/color to begin with, you'll start to see posterization, especially in the shadow/highlight areas. At the final stage, you'll flatten the image to 24-bit color to print it, but you should maintain 48-bit color as long as you're actively editing.

Update 2005.02.11:Updated with reference to GraphicConverter for the Mac.

Comments are more than welcome on this post.