Which type of mic you're going to buy depends greatly on what you'll be using it for. Drums, vocals, electric guitar, acoustic guitar, electric bass, acoustic bass, something else?
Because I'm on a severely restricted budget, I went to Radio Shack and got myself an Optimus 33-3018 cardioid mic for setting in front of my guitar amp. I'm sure everyone will laugh, but it's perfectly suitable for personal recording and sounds just fine to me. Your talent is much more important than the microphone. A ****ty guitarist is a ****ty guitarist whether or not he has a $2000 mic pointed at him.
As for getting the mic into your computer, you could use the Mbox, but that's $500. Have a look at other USB interfaces like the M-Audio Duo ($230), which is basically the same thing, and the Edirol UA20 ($180). The iMic is the cheapest solution, but you do get what you pay for.
As far as software, Audacity is free, but very weak. There is good software for well under $100 like SoundStudio, Spark, etc. if you look at Versiontracker, and really great software for over that.