This will vary by the amount of time you are traveling and the specific country you are going to, so the options are immense. 

Trains

For Europe , a Eurail or Britrail pass (see earlier section) is one of the best deals in the world.  The train network in Europe is extensive, comfortable, and timely.  With a Eurail pass, all you have to do is hop onto any train and show your pass. The only exception to this would be if you took one of the “bullet” trains (TGV in France , or ICE in Germany ).  For these trains you need to make a reservation (usually you can do this when you arrive at the train station) and only costs US$5 or so with a Eurail pass.  These bullet trains are simply amazing, they are as comfortable as first class in an airplane and will get you across large parts of Europe in only a few hours (since they travel at 180MPH).

Using this train pass you can jump from city to city with little or as much advanced planning as you want. The Eurail pass also covers some ferry rides from France to England or Ireland , making this an even better deal.

Trains also have the advantage of being able to take overnight, thus saving you travel time (as well as another night’s lodging as well).  For a bit more money you can reserve a couchette car on the train which is basically a small room on the train that have seats that convert into 4-6 beds during the evening.  This is far more comfortable then trying to sleep in the normal second class seats, and can be a fun time if you are travelling with friends.

Planes

If your time is short or have much territory to cover this is a good way to get around while overseas.  Europe and Australia have competitive low-budget carriers in their local airline industry, so good rates can be found fairly easily.  In Australia (flying Virgin Blue), I found planes were key to getting around since that country is immense and little exists between the major cities.

Some airlines offer passes similar to the Eurail pass in that you pay a set fee and can then fly an unlimited amount of time within an area.  This may be worth doing only if you expect to fly a great deal, or want some flexibility in travel and do not want to be constrained by fixed tickets. Check with a travel agent on these.

Automobiles

Renting a car is a good way to see out-of-way places and gives you the ultimate flexibility.  It is also horrendously expensive for a backpacker. I would recommend only renting a car for a day or two to explore a hard-to-get-to location (like the countryside) and not renting one to go from destination to destination. 

For those travelling in Australia or New Zealand and are planning to stay more than month or two, a great option is to simply buy a car.  There is a huge market for very cheap used cars in these locations, where backpackers can buy a car for US$500-US$2000, travel around for a few months, and then sell the cars before they leave.  If you are travelling with a friend or two this can be a great way to see these countries.  Most hostels have bulletin boards advertising such cars from other backpackers who are about to leave.  You can also check the local papers as well.

If you will be travelling by yourself I would not recommend buying or renting a car.  You will typically meet fewer people travelling this way since cars are very isolating by their nature.

Buses

Point to point buses (like Greyhound-Pioneer and McCafferty’s in Australia for example), are typically the cheapest way to go from city to city in most countries.  They are also the most uncomfortable.  Taking a bus between locations is a good idea when the distance is short to medium in length.  It can also fit any backpacker’s budget.  However, I would recommend a bus for travel only if it were under 12-15 hours in length.  Any longer than this and the journey becomes more of a nightmare since bus seats are far smaller and have much less leg-room than a train or plane.  It is nearly impossible to sleep on one due to jolting and turns on the road.

Tour buses are another option. Tour buses operate for two days to several weeks on a set route and will hit pre-arranged locations at fixed dates.  Unfortunately, many of these will hit just the most touristy locations and have little opportunity to interact with locals.  They are also not flexible if you want to stay in a location longer (or shorter).  However, I would still recommend short one to four day local bus tours (like a national park, or a wine tour, etc) for a region.  I would not recommend these tour buses for seeing an entire country or for more than four days.

A third type of bus travel is a combination of tour and point-to-point bus service.  These services started in the New Zealand and Australia with the Oz or Kiwi Experience bus tours, but I understand they now exist in Europe as well.  These bus tours follow set routes but you get on and off at any town or city and stay as long or little as you like.  They also will often go to out-of-the-way places, call hostel reservations ahead for you, as will reserve other activities (like bungy jumping, skydiving, etc).  This is a great option if you want to see the most of a country, meet many other backpackers from around the world, and only have a short amount of time. However, the “experience” is pretty intense since these companies cater towards young party-hard backpackers, so after a 2-3 weeks it can get old.  Also, while in theory you can get off and on at any spot, you have to reserve ahead these stops, so if you change your mind and want to stay longer (or get a hangover and miss your bus) you might have to wait 2-7 days for the next open slot on a bus.  Be warned I have had to rent cars to catch up with a bus because of this!

Hitchhiking

For the most adventurous backpackers, hitchhiking is the ultimate low-cost travel option, but also the riskiest.  In many countries, this is not nearly as taboo as it is in the United States . Some backpackers love traveling this way and often talk about how this is a good way of meeting locals and crossing a country at the same time.  However, for every tale of adventure and fun, there are also tales of being stuck on a lonely road while its raining.  Australia and New Zealand are seen to be the friendliest and safest countries for hitchhikers, but like any place, caution should be used when traveling this way, especially for women.

Next: The Trip - Safety & Security