Web fonts are supported in Safari 3.1, the upcoming Firefox 3.5 and the upcoming Opera 10. Internet Explore has supported a (different) format since IE4.
At this point, the biggest problems with the implementation in Safari, Firefox and Opera is that they require you to upload the original font file to your web server. For many fonts, this would constitute a violation of the license you received from the type foundry. Therefore, web fonts right now are not an appropriate solution if the type foundry has not given you permission to use them. However, there are freely licensed fonts available.
This leaves us with roughly three other options: images, Flash, and JavaScript-based solutions. Images are often preferable in that they have minimal impact with regards to browser quirks and performance, however dynamic image generation in, say, PHP often does not look as good as other solutions. You could of course manually create images in Photoshop, but that would usually defeat the purpose.
sIFR uses Flash to render the text, and is quite flexible in that you can select the text, change it dynamically, and have some control over the styling of nested HTML elements. Hoefler & Frere-Jones has given sIFR the OK, provided you pay for a server license and take all possible measures in limiting the sIFR Flash movie to your domain name.
Cufón is a purely JavaScript solution that has implemented its own rendering engine, which is insanely clever. At this point its not as flexible as sIFR, and its legal issues are still unclear.
That said, images, sIFR and Cufón are all hacks, and we need proper web fonts yesterday.
(Disclaimer: I'm the lead developer of sIFR, so I might be somewhat biased.)