I came to decide that I wanted to get out of the business of bottle management at the beginning of this year and got my kegging system set up. A bit expensive (and I still end up filling a few bottles for gifts and homebrew compeititions) but worth it.
(Just as an aside - there are some things out there like tap-a-draft that are less expensive than a typical corny keg system, take up less room, but I've also heard that they don't work as well)
Storage: Most people seem to use an extra fridge or freezer and a temperature controller for their cooling/storage of the kegs. It is also possible to set up a system using 2.5 gal or 3.0 gal mini corny kegs in your regular fridge, but that won't give you a lot of room for your food
and plus that means you'll struggle to find room for more than one keg/tap at a time. Craigslist, freecycle.org, and similar forums are a good way of picking up good discounts on fridges/freezers. I got my 7.2 cuft chest freezer that can hold three 5 gal kegs, the CO2 tank, and a couple of 6 packs, from craigslist for about half of list price. Another thing you'll see on the forums are references to Sanyo mini fridges. These have become a bit of a cult hit because they are just big enough inside for 2 regular corny kegs, and they take up a minimum of floor space. If you're looking for a lower cost option though they will be harder to get a deal on than if you aren't restricting yourself to a single model and can use any fridge or freezer that comes along that meets your needs.
Container: 1 or more 5 gal corny kegs. Reconditioned ones are much cheaper and work just as well as new ones. If you buy from a reputable shop (I've been happy with midwestsupplies.com) you'll save some possible extra effort in doing any parts replacement of o rings, posts, etc. as the good places do all of this for you.
Carbonation and dispensing: a CO2 tank (size is up to you - really just determines how long between CO2 tank refills you have to go) and basic single gauge regulator. If you're planning on only kegging for big events where all the beer will be consumed in a day or two, you could skip this and get one of those hand pumps like in college. For that, you'd carbonate the keg using priming sugar as in bottling, then dispense with the pump. The downside being that doing that oxidizes the beer quickly which would ruin it's flavor in a day or so.
Taps: the tap itself, possibly a shank if you're going through a fridge/freezer wall, or a tower if you're mounting on top of a small fridge. Or the picnic dispenser will let you get by for awhile. Prices vary with design and materials used. I went with stainless steel forward seal faucets because I've read that the traditional faucets are prone to sticking if they aren't used or cleaned very regularly, and since I often go days without using a given tap, I didn't want those problems. I haven't used a picnic tap myself ever but other people say that is an acceptable short term solution.
Misc: beer lines, gas lines, fittings, some keg lube is almost mandatory for helping to get some kegs to seal. Good to have some standard wrenches so that you can remove the keg posts for long term cleaning and maintanence. You'll have to clean the kegs, beer lines, and taps every so often but your normal brewing cleaners and sanitizers seem to work fine for this, so you may not need to get specialized beer line cleaning chemicals.