Since this thread has been rezzed I'll jump back in and report on another great idea that I've recently incorporated.
Building on the poker chip/pipe cleaner ideas above, you can go to just about any craft store or some place like Target and get a pack of "foam paper" for about 3 bucks. This stuff isn't really paper (I can't remember exactly what it's called), but it's like 1/16th of an inch thick foam that comes in a variety of colors and cuts easily but retains its shape. A friend of mine picked up a pack that had, I believe, 3 sheets (about 5 1/4 inches by about 10 inches) each of 10 colors - again, for about $3. We then took this stuff and cut it into 1" squares (and 3" x 3" squares and 5" x 5" squares for AoEs).
This is really an awesome tool for showing conditions on the battlemap! Poker chips are too large and other stuff can get in the way, but this stuff is great because it's square and the minis have bases that are circles - so you can always see it and it's never too big! We just stack different conditions on top of each other, and yes it gets funny when you have like 4+ different things going on (bloodied, blinded, cursed, and "in a cloud of daggers") and the minis get much higher than each other, but it really works great. It helps both the PCs and the DM keep track of what is going on with which enemy or character. It's great for healers (or strikers) when you can just glance at the board and immediately know things like who is bloodied and who isn't. It's also a great tool for warlocks, in that they can curse something, and when it dies and they get their little square back, it's a reminder to add the temp HP. And it's been helpful for the wizard with the 5x5 movable/sustainable stinking cloud, to see exactly how you can move it around and keep track of it without constantly erasing.
Anyway, we've had a lot of success with this cheap tool and I recommend it to anyone, especially someone just starting out.