Amanda and Jennifer both asked for a primer on cloth diapers.
I want to start out by saying that using cloth diapers doesn't make you a better parent, and using disposibles doesn't make you a worse parent. The kind of diapers you use has nothing to do with your parenting. I do think it reflects the importance you place on preserving natural resources, which is another important topic, but it's not directly related to parenting.
(If we're talking about doing the least damage to the environment, cloth diapering is only second-best, anyway. If you really want to make the least impact possible, you're probably focusing on using elimination communication so you don't need diapers at all. EC causes the least damage to the environment, followed by hemp or organic cotton or wool diapers you wash at home, followed by regular cotton or artificial fabric diapers you wash at home, followed by a diaper service (all that water!) and biodegradable disposible diapers like g-Diapers (the liners are flushable) or Nature Boy & Girl (compostable in a community compost system, which means that Americans are hosed because we don't have them), followed by "natural" diapers (like Tushies or Seventh Generation), followed by national- or store-brand gel-filled diapers. But you also have to factor in the cost and your ability to wash, too. If you have your own washing machine, you can do cloth. If you don't, and have to go to a laundry room or laundromat, it's super-tough to do cloth, and you'll probably choose to use a diaper service or disposibles. And the cheapest of those options is store-brand gel diapers. So while washing your own cloth diapers is cheapest by far, that's only if you've got easy access to a machine, which takes some money to begin with.)
Let's talk about a little history here. If you've mentioned cloth diapers to anyone over the age of 60, you've probably gotten horrified looks or chuckles and mutters of "You'll change your tune soon enough." That's because years ago the only diapering options were flat diapers--a big single layer diaper that you folded into the shape and thickness you wanted. You'd take them off the line, fold them, and then when you put them on the baby you'd fasten them with two (or one if you were really adept) diaper pins. Then you'd put rubber or plasticky bloomers with elastic waistbands and leg openings on over the diapers. It was a lot of work, between the folding and the pinning and the elastic pants. And don't forget that washing machines weren't as powerful as they are now, so almost everyone soaked their diapers in a "wet pail" full of water and Borax or some other kind of soaking detergent. (Let's think about how many toddlers tipped wet pails and got poopy, detergenty water all over the floor. Ick.)
So it's completely understandable that these women think people our age are nuts for using cloth. They have no idea how technology has been such a boon to cloth diapering, making it almost as easy as using disposibles. Even the most complicated systems are a piece of cake compared to what our grandmothers had to do.
There are a ton of different ways to cloth diaper now, since most diapers are made by small businesses (many by work-at-home moms). I've put links in here so you can click and see what all the diapers look like, but I don't have personal experience with any of these sites, so don't limit your research just to these sites.
The cheapest way: The cheapest way is to buy 2 dozen diaper-service-quality (DSQ) Chinese prefolds and 6-8 nylon pants (with elastic waistbands and leg openings). A "prefold" is called that because it's an old-fashioned flat diaper that's been folded and sewn into place so that there are 4 layers of absorbancy on each side and 6 down the middle. You can get bleached or unbleached. Bleached are nice and white, but unbleached are softer. You'll also need some diaper pins or a Snappi. A Snappi is a little rubber thing that lets you fasten prefold diapers without pins, and reduce the danger of poking yourself or your baby. You put the diaper on the baby and pin both sides with the pins. The benefits of this system are that it's cheap--around $75-80 to get set up for a newborn. The drawbacks of this system are that you have to pin or use a Snappi (this site shows how to fold and pin a prefold with a Snappi), which takes time when your baby is old enough to squirm, and the nylon pants might not fit your child correctly and could leave gaps (which cause leaks) or bind and leave red marks on the legs and waist.
The most common way: Also cheap, but not as cheap as going with plastic pull-on pants. You buy 2 dozen DSQ Chinese prefolds and 6-8 velcro or snap covers (a.k.a. "wraps") (scroll all the way down). Fold each prefold loosely in thirds the long way, then lay it in the cover. Then attach the sides of the cover with the velcro or snaps, and you're done. If you really want a tight fit on the diaper, you can pin or Snappi the diaper first before you put on the cover. The benefits of this system are that it's still pretty cheap (around $110 to get set up for a newborn), it's easy, and you won't have many poop blowouts with runny breastmilk poop because the cover stops it (the covers will get poopy, though). The drawbacks of this system are that the two parts are confusing for some people, you may have to play around with cover brands before you find one you like that really fits your child well, and you have to buy new covers (and, eventually, diapers) when your child grows out of a size.
IME the real drawback of using prefolds and velcro covers is that you feel like you should or could be using something fancier and you let your head get turned. For most SAH parents and even many WOH parents, this system is completely adequate to all their needs (except for nighttime, which I'll cover below). But there are fancier, more exciting diaper systems, which most people end up dabbling in unless they make an effort not to look at anything else.
Fancier two-piece systems: There are fitted diapers (either with their own velcro or snap closures or without) that go in covers. They can be made of cotton or hemp. All sorts of WAHMs make fancy fitted diapers and/or equally fancy covers out of all sorts of fabrics: PUL (fabric that's basically been put through a laminating machine so it's waterproof), polar fleece, felted lanolized wool (which is natural and very breathable, but also NOT machine dryable!) in snap style covers or long pull-on pants, and probably three or four more choices I've never even heard of. You can get covers with teddy bears, dinosaurs, Dora, your favorite sports teams, Darth Vader, flowers, tie-dye, and almost anything you want (go to Ebay and search for "covers" in "Baby" > "cloth diapers"). The benefits of these diapers are that they're really, really cute. The drawbacks are that they're more expensive and can become an addiction.
One-size two-piece systems: Some companies sell fitted diapers that fold and snap in different ways to fit babies from around 8 pounds up to around 35 pounds, with covers to match. If you like fitted diapers, this can be a far more economical way to go, because you only have to buy one set. You can get them in white or in cute prints. However, they have a larger entry cost (around $280 to start).
All-in-ones: For people who are confused or creeped out by separate diapers and covers, all-in-ones (AIOs) can be great relief. AIOs (click on "All-in-ones" on the left side) are exactly what they sound like: a cover and diaper all together in one. They fasten with either snaps or velcro, and are basically the same to put on and take off as disposible diapers are. This makes them great for daycare situations or reluctant partners. The benefits are that they're so easy to use, so you may end up using cloth diapers longer than you would if you had a two-piece system. The drawbacks are that they're expensive ($12-15 apiece) and they often take a long time to dry. To fight the drying time, some AIOs have snap-in liners that dry separately.
Pocket diapers: This is a fabulous solution to the problem of AIO drying time. Pocket diapers consist of two pieces. The diaper is an outer layer of PUL or waterproof fleece, and the inner layer (that touches the baby) is fleece or suedecloth. There's an opening so you stuff the diaper with a folded prefold or hemp or microfiber soaker pad. The pee goes through the fleece layer and gets absorbed by the soaker, and the surface of the fleece stays mostly dry to the touch. This makes this system especially good for nighttime, because you can put in a bunch of soakers to be super-absorbant. The benefits of this system are that it's super-easy (great for daycare and reluctant caregivers), quick-drying, trimmer than most other cloth diapers, and good for people who can't change their babies as often (like little siblings who go along to the older one's activities). The drawbacks are that it's expensive ($15-20 per diaper), although you can mitigate that cost by getting one-size pocket diapers (like Bum Genius or Wonderoos) so you don't have to buy new sizes.
Cotton vs. hemp: Cotton farming is really hard on the environment, but cotton is soft and cheap and absorbant. Organic cotton is more expensive, but far better on the environment. Hemp is fine for the environment, 40% more absorbant than cotton by weight, and has natural anti-bacterial properties, but it's more expensive than cotton and is stiff until it's been washed a bunch of times.
Work-out-of-the-house parents: You can do cloth diapers part-time at home and on weekends, and you'll still save a bunch of money. A mom friend of mine used only 10-12 disposible diapers a week in a daycare center once her son was over a year. Depending on your childcare situation, you may be able to use cloth diapers full-time. With a nanny it's no problem, although you'll probably want to get her input on which system you go with. If you're doing in-home daycare or a daycare center, ask your providers--you never know what they'll say. Ally uses pocket diapers at home, but her in-home daycare providers actually prefer prefolds--with pins!--and covers.
Part 2 is here.
Tell me your questions or experience and recommendations in the comments, please.