Jira has built in version information, which looks quite handy. However in an iterative model you might release a new version every couple of weeks and that would mean a lot of versions in the lists... which is functional but strikes me as a bit clumsy.
Is this the right way, or are there better approaches in how versions are used in Jira?
JIRA lets you "archive" old versions, so they stop cluttering up the interface.
But if you have hundreds of values for any drop-down list, they are hard to navigate. One option is to use a text field. Or GreenHopper lets you have hierarchical versions. I presented yet another idea at the SF Atlassian User Group earlier this year: create a new issue type "build" and link the instances of build together. More details at:
http://toolsmiths.blogspot.com/2010/04/one-bug-multiple-branches.html