There have been many jokes about the notion that all you need to start bird watching is a field guide and binoculars, the joke being that many bird watchers wind up with thousands of dollars of extra equipment, from scopes to cameras, to a full library of bird books. I have been no exception, although I will forcefully argue that you don't even need a bird guide or binoculars to start bird watching. You just need a change of focus.
But this section isn't about philosophy, it's about gear. Hard core American consumerism. I've listed below the items that I've used extensively during 2004 with comments about how helpful or unhelpful they've been.

This is easily the best and most reliable gadget I purchased for the year. It is incredibly small and lightweight (similar to a pen) and also durable (I've dropped it many times to no effect). I have used it for all of the following purposes:
Nikon Coolpix 4300 Digital Camera - about $400

This has been a great tool in the field with my only complaint being that is a little too fragile for the abuse I subject it to. The Nikkor zoom lens is external and the zooming mechanism is prone to breaking when the camera is dropped or even shaken too hard (during a rough climb for instance).
I use the camera primarily through my Nikon Field Scope and I have been able to take some very satisfactory pictures. The subject has to cooperate significantly to get a good picture as it takes a while to focus the scope, focus the camera, play with various settings, etc. I've also been able to take pictures straight on and through my binoculars. I leave the camera on the highest resolution settings so that I can zoom in on pictures of far away subjects without losing too much clarity.
Nikon Field Scope - about $700 including car mount and tripod

My field scope has been mostly reliable, expecially given the severe beating I give it on a routine basis. The cheap Manfrotto tripod that came with it (via Eagle Optics) is literrally on its last leg (two of the three will no longer collapse properly). I have a car window mount that is very useful on driving routes (i.e. around the Davis Mountains).
Having a smaller (60 mm) and lighter scope has been a big plus given all of the air travel I have undertaken. I can load the scope (wrapped in a rain jacket) and the collapsed tripod into my clothes duffel and avoid checking baggage.