I sort of did a combination of things...
I started with one of those hand-held magnetic dry erase boards.
On it I drew a series of boxes, using a Sharpie permanent marker. If you draw over the permanent marker with a dry erase marker, you can lift the lines up. So be a bit careful on that. Otherwise, you just draw out your grid using the permanent marker and don't have to worry about it.
I used the Paizo GameMastery Combat Pad for my inspiration. You can see a picture of it here:
http://paizo.com/image/product/catalog/PZOOMS/PZOOMS1000_500.jpeg
On my board, I did a whole set of numbered boxes at the top similar to what they've got, to be able to keep track of the rounds if need be.
I've got about 10 "boxes" (horizontal) total on the board that I drew. There's 4 columns (as I recall), with the far left one being for Initiative, the next one being used for hit points, and then a "Special" and "Notes" columns. I simply rearrange the magnets of the PCs/NPCs/Monsters based on Initiative.
Of course, that's just my current layout. Since I drew it all out, I can change the layout anytime I need to.
I then ordered the GameMastery Combat Pad: Extra Magnet Pack:
http://paizo.com/store/paizo/gameMastery/accessories/v5748btpy7y0z
I generally use the colors the way they've got them defined. No real reason for it, other than it makes enough sense to me.
Since the entire thing is shipped as a pre-punched magnetic sheet (you pop out the magents) I then took the left over frame (which is magetic too), and chopped it up into chunks about the same size as the pre-punched magnets. They're white and have a bit of an odd shape, so it's easy to distinguish them.
These additional magents are used to record Hit Points, or other special things on them. One of the boxes I have on my board is a Special section, so that's where I pop it. It's not like I can write _notes_ on the magnet, but I can put down a condition (blind), hit points, or whatever I need.
I can post a picture to my flickr account if anyone is really interested. Pretty basic stuff though really.
Total cost: I think around $20. $8 + Shipping for the Magnet Pack from Paizo, and the magnetic dry erase board was around $7. You can buy them at Wal-Mart, Target, and office supply stores.