I found the best combination to be:
1. Buying a phone once you've arrived. It shouldn't take much work to find a phone in the $50-$75 range.
2. Get a local SIM card. That will give you inexpensive outgoing local calls and free incoming calls.
3. Get a calling card for calls back to the States. One of the best I've found is at
www.nobelcom.com. From most countries, their rates are very cheap. In the alternative, go to a local "Tabac" (they're everywhere), tell them you'll be calling the U.S., and buy one of their phone cards.
Once you done it this way, you'll find that your calling costs are considerably reduced. If someone needs to call you from the U.S., they can use Skype, which costs about 2 cents a minute.
What you don't want to do is take one of those silly mini keyboards (a.k.a., Blackberry) or use the European access for Verizon, Cingular, etc. and get hit for charges of 50 cents to $1 a minute.
Of course, if this is your one and only trip abroad, you could just be lazy and use the overpriced services. Even then, you should still buy the phone and SIM card, then sell them on eBay when you get back. The card for calling home is the best way to go.