There are some really cool labels out there being made by some really talented people -- unfortunately, I don't have any graphic arts experience or fancy software. Yet, I enjoy the creative process of creating a label that reflects the effort I putting into making my own beer. Besides, you need some way of figuring out which bottle contains what after you've made a few batches!
I just make my own labels using Powerpoint. I search the web for some humorous or appropriate picture or icon that is related in some way to the beer style I produced. I then copy and paste it into the Powerpoint sheet. I use the text boxes to insert any text on or around the picture.
I recommend fitting 4, 6, or even 8 labels on one 8.5" x 11" sheet of paper. From personal experience putting on and taking off the labels, I advise keeping the labels small. My current preference is 8 labels per sheet of paper.
If you get the proportions right, it makes it easy to print and cut (saves time, ink, and paper, too). I use one of those edge cutters rather than scissors. I use either rubber cement or glue sticks (they're often really cheap during or right after the back to school sales when they're in the clearance bins). The labels and the glue comes off really easy with a soak in hot water.