We just use a Canon Digital Camera. The one we have is actually on the more portable side, so in terms of picture quality almost any of the Canons will do. The preference for digital is more due to being able to check, edit and post pictures in a much quicker fashion.
Lighting is achieved using a diffuser and a bright light. We actually have a photography lamp - a 500W Halogen for around $150. Cheaper and more expensive lights can be had. We prefer the hot setup (always on) rather than a remote strobe/flash connected to the camera mainly due to price. The diffuser we got was $30 and is a folding/collapsing disc of fabric. I think any fabric between the subject and the light source will do though. Mainly we spent the money for ease of setup and portability. Oh yeah, a tripod for the camera helps a great deal :grin:.
For editing we use Adobe Photoshop 5.5 which aids in cropping the pictures and adjusting color levels, sharpening etc.
Other than that, background materials or accessories are up to your imagination. Anything from holsters to a box of your favorite ammunition etc.