Modules for uploading & including images & documents

For images and (links to) files in their own fields

FileField (http://drupal.org/project/filefield)
Requires CCK.
Defines a file field type for CCK and enables uploading files.(This functionality is part of core in Drupal 7.)
ImageField (http://drupal.org/project/imagefield)
Requires CCK, FileField.
Defines an image field type for CCK and improves uploading images.(This functionality is part of core in Drupal 7.)

For images and (links to) files in general text fields (e.g., Body)

WYSIWYG Filter (http://drupal.org/project/wysiwyg_filter)*
"Provides an input filter that allows site administrators to configure which HTML elements, attributes and style properties are allowed" (based on whitelists). This lets administrators permit content editors to include images in general text fields without giving them access to Full HTML. (Allowing Full HTML is a security risk and just generally a Bad Idea.)
IMCE (http://drupal.org/project/imce)
Provides an image/file uploader and browser supporting personal directories and user quota.
IMCE Wysiwyg bridge, aka IMCE Wysiwyg API bridge (http://drupal.org/project/imce_wysiwyg)
Requires IMCE, Wysiwyg.
Makes IMCE available as plugin for rich text editors integrated via Wysiwyg.
IMCE Mkdir (http://drupal.org/project/imce_mkdir)
Requires IMCE.
Allows users to manage directories in IMCE

For using both approaches together

Insert (http://drupal.org/project/insert)*
 
Adds a button to FileField and ImageField widgets so images and links to files may be inserted into general text fields. When used with ImageField and ImageCache, images may be inserted into text areas with a specific ImageCache preset.
FileField Sources (http://drupal.org/project/filefield_sources)
Requires CCK, FileField.
Extends FileField to allow referencing existing files, remote files, and server files.

For additional image and file assistance

ImageCache (http://drupal.org/project/imagecache)
Requires ImageAPI.
Provides dynamic image manipulator and cache. Allows automatic generation (and re-generation) of thumbnails and the like.
ImageAPI (http://drupal.org/project/imageapi/)
Provides an image API supporting multiple toolkits.(This functionality is part of core in Drupal 7.)
Transliteration (http://drupal.org/project/transliteration)
Converts non-latin text to US-ASCII and sanitizes file names.