Skype now available on Android 2.1+ phones, works via Wi-Fi or 3G
The app is free and works just like the desktop client. After logging in, it's just a matter of dialing a number, or selecting a name from your contacts list. Pricing is the same, but obviously if you use 3G rather than Wi-Fi you might end up with a rather large bill. Incidentally, there's a footnote on the announcement that says you can't use 3G in the USA (why?!).
There's also a link to monthly subscriptions -- for just a few dollars (or pounds, or euros) you can get unlimited calls to Europe, or the entire world. Android smartphones with Wi-Fi can be had for just a hundred dollars or so... combine that with Wi-Fi Internet access at your local coffee shop and a Skype subscription, and you have a very economical solution indeed!