Depending on your needs, you need either Windows SharePoint Services (WSS), which is free as in beer and can be downloaded from Microsoft, or Microsoft Office SharePoint Server (MOSS), which is not free and contains WSS plus 'enterprise' features such as Excel Server (for web access to Excel sheets), Forms Server (for InfoPath), lots of site templates and goodies and all the Business Intelligence stuff.
For development, you need Visual Studio 2005 or 2008 and most likely the SharePoint SDK.
As a side note, I've never been able to code a MOSS Workflow in a machine that does not have all the server stuff installed, so I recommend you set up a vmware or virtual pc box with win2003 server + sql server + active directory + sharepoint if you have to develop workflows.
As for system requirements, that entirely depends on your scenario.