I have seen a number of questions on this site asking about what hardware / simulation software is the best for building a CISCO lab for training, So here's a quick introduction to some of the most common used, along with strengths and weaknesses.
Below are the 4 common solutions you will see mentioned.
1: CISCO Packet Tracer 5.0 and above
2: Real Hardware
3: GNS3 (
4: other simulators such as Boson net sim
Starting with CISCO packet tracer, this is an ideal starting place for people new to Cisco. It has a great drag and drop interface, switches and routers can be configured with a point and click interface, as well as the command line. It also has a brilliant simulation mode where you can watch the packets travelling across the devices. clicking on them at any point to see how the devices are dealing with them at the different levels of the OSI. It is a great way to see the fundamentals of the network taking place.
However there is one big problem with it... It is not a free download.. In fact it is quite hard to get hold of, but if you have a Cisco partner who can get hold of it for you, or you are part of the Cisco academy. This would be my number one choice for starting out in networks.
The second Solution is The real hardware . This is going to be the most expensive choice, but there really is nothing better than configuring the real thing. No matter how much I use simulations, the real thing still feels the best.
Now if you are new to Cisco equipment you may well be confused by the vast number of devices and feature sets available. Espicaly when trying to decide what ones to buy. One way to think about is to image say a 2600 series router as a Intel P3 desktop with 512mb ram, and a 7200 series router as you top of the range 8 core super server with 32Gig of ram. Now they will both run windows server 2003. but as you add more features such as email servers, SQL servers, web servers. the low spec machine is quickly going to get bogged down. In the same way a 2600 router will have 80 or 90% of the functionality of high end router if they are both running the same feature set. They will just have much lower through put, But if its for a lab there is no need for high through put.
There is also the need to find space to put the equipment and the noise and power it will use to consider if you want to go this route. At the time of writing a 3600 series router will cover just about every thing you will need in the CCNA and CCNP course if you have the correct IOS installed, and they are less than $100 each.
The third Solution is GNS3. Now after many false starts with this software, I am a huge fan, it uses actually IOS files to virtulise the hardware on a PC, and allows you to build up networks with a drag and drop interface. My main issue with it, is that for some one new to networking there is a steep learning curve! you do need a basic knowledge of networks and computers in general to get it up and running. But once you get in to it, it is even possible to connect the virtual switches and routers in to your real network, and build simulated networks that include 10 or 20 routers in complex layouts all using one PC. (GNS3, is not only good for learning about networks, but also very power full as a tool in developing and testing ideas to put in to a live production network, if you are serious about following a career in Cisco networking, it a tool you are very likely to come across quite a bit.)
Of course you will also need to get hold of the IOS files, you can either copy them of production hardware, or down load them from the CISCO site if you have the correct login. OF course there are licensing issues and strictly speaking Cisco do not allow you to do this. However having spoken to a member of Cisco staff, as long as you own a licence for the software in your production network, running a copy of it, (either installed on hardware or in something like GNS3, for test/learning purposes) is unlikely to get you in to trouble.
Lastly there are many other simulation packages out there such as boson netsim, but to be honest none of them really match up to the three above. Most are limited to only support the functions for specific topics, making them useless as a tool to study networking. They can also normally work out more expensive to get the same functionality that you would from purchasing some real hardware.
In terms of models of hardware to use, (actual or simulated, August 2009).
For a router I would suggest a 3640
For a switch I would suggest either a 2950 or if you can afford it a 3550
These will take you well in to the CCNP course, and represent very god value for money. They also, with the correct IOS installed, can be used to practice setting up functions that are found on the latest hardware available. .