This is a list of some of our favorite Drupal modules. It will be updated from time to time.

Pathauto - automatic creation of path aliases based on your settings.
http://drupal.org/project/pathauto

Token
http://drupal.org/project/token

BUEditor - add markup to posts via buttons (and you can add your own!)
http://drupal.org/project/bueditor

Imagefield + imagecache
http://drupal.org/project/imagefield
http://drupal.org/project/imagecache

Views - query builder
http://drupal.org/project/views

CCK - content construction kit
http://drupal.org/project/cck

CCK's Node reference and User reference
(especially in combination with views)
(... not sure about handling reciprocal references...)

Global redirect - resolves the trailing slash issue for better SEO
http://drupal.org/project/globalredirect

Path redirect - adds options for redirects for better SEO
http://drupal.org/project/path_redirect

Related links - implements some heuristics to find content related to current node
http://drupal.org/project/relatedlinks

Panels 2 - advanced layouts and content display, and contextual powers
http://drupal.org/project/panels

Nodequeue - manage and order a special list of content (with tweaky control in a way Views doesn't let you)
http://drupal.org/project/nodequeue

Workflow_ng - configure advanced workflows based on events in Drupal
http://drupal.org/project/workflow_ng

Views bookmark - let users bookmark pages in a site
http://drupal.org/project/views_bookmark

Content access - the most sane solution to the access control that I've found
http://drupal.org/project/content_access

CAPTCHA and ReCAPTCHA - spam prevention
http://drupal.org/project/captcha
http://drupal.org/project/recaptcha

Coder - code review for modules and module upgrade help
http://drupal.org/project/coder

Haven't tried, but want to keep on the radar:

Search attachments - index the contents of .docs, .pdfs, and .txt files
http://drupal.org/project/search_attachments

Teleport - productivity enhancement that lets you jump to pages in a site using a Quicksilver-like interface
http://drupal.org/project/teleport

Modules I maintain

Insert View - embed views into nodes and blocks without using PHP
http://drupal.org/project/insert_view

Insert Block - insert blocks into nodes without using PHP
http://drupal.org/project/insert_block