FogBugz 4.0, $99 per user
Fog Creek Software
New York, New York
(212) 279-2335
http://www.fogcreek.com
Full disclosure: While I do not receive any sales commission or other payment directly from Fog Creek Software, they were instrumental in my landing the contract to write Painless Project Management with FogBugz, and I make royalties every time a copy is sold (and a pittance every time someone buys the book through that Amazon affiliate link, too). So I do have some stake in the success of the product. I was a happy and paying FogBugz user before the book contract.
If you're building software as more than just a hobby, you need bug-tracking. It really is that simple. If you don't keep track of things that are wrong with the code, and features that remain to be added, you'll never manage to stabilize the product to the point where it's actually usable.
But of course there are a whole lot of ways to track bugs. You can stick notes to your monitor. You can keep a text file on your desktop. You can maintain an Excel spreadsheet. Or you can use any of dozens of applications out there, from simple databases to elaborate workflow systems, ranging in price from free to hundreds of dollars per seat. I've tried a number of systems over the years, and right now FogBugz is the one that hits the sweet spot for me. For starters, it's browser-based (I use the version that runs as ASP on IIS with a SQL Server database, but you can also use PHP on Linux or Mac OSX, with Access or MySQL databases to store the data). While I'm not a fan of Web applications for most work, I happen to have customers and partners scattered all over the place. The Web browser makes a nice common denominator way for everyone to work with the same application. FogBugz supports IE and Firefox quite well, without annoying cross-browser incompatabilities.
I also like the simplicity of the system. A reasonably smart person can pick up the basics of entering new cases (the blanket term that covers both bugs and feature requests) in fifteen minutes, and that means I can get new clients entering their own feature requests quickly without a lot of handholding. It doesn't take much longer to show them how to use filters to track the progress on their projects. The flow of work is simple: cases are open, they get assigned to a developer until they're resolved, and then they go back to the original person who gets to decide whether to really close them or not.
At the same time FogBugz doesn't lack for features. For example, you get a nice discussion group implementation here, so you can let your support staff interact directly with customers in a question-and-answer setting online. A few mouse clicks will port any discussion thread into the bug database for follow up as well. You can assign release notes to any case, and when you're ready to release a new version it's easy to compile these into a list of what's new with that version. You can subscribe to changes in individual bugs or lists of bugs in your RSS reader or get e-mail notifications when a bug is updated. There's a screenshot tool to submit a new bug as soon as you spot something wonky on screen, and a batch editing mode that lets you sweep changes through many bugs at once. While the beginning user will find FogBugz easy, the advanced user will find enough power to stay productive.
You also get source code control integration, which is a powerful way to keep track of what's going on with development - jump from a bug to the code that was submitted to fix it, and vice versa. The help file shows you how to set this up for the most common source code control systems, and you can script it for others.
Not everyone will find FogBugz to be perfect. In particular, if you're looking for a scriptable or complex workflow (for example, to assign resolved bugs to QA or to age bugs to go to management attention) you'll need to look elsewhere. You also don't get custom fields to add your own data to bugs (in fact, that's a feature deliberately left out of the product, on the grounds that making it complex to enter bugs makes it less likely that people will actually put the bugs into the system). On the plus side, it's pretty darned easy to find out whether FogBugz is the right system for you: because it's a browser-based system, you can sign up for a 45-day trial hosted on the Fog Creek servers at any time. If you're not doing any bug tracking at all, or if you're outgrowing your current system, then you definitely ought to take a look.