I created a panorama using Hugin yesterday. Hugin can take a series of photos and automatically stitch them together. It works by finding common points within the photos, rotating, scaling and skewing them so they overlap.
It then blends them to form a nice panorama. Whilst my example is rather ordinary, it can create outstanding art see this Hugin Gallery. Hugin is free and runs on Windows, Mac, and Linux. I was able to create this panorama in about 6 minutes - and that was my first time using the software :).
The panorama is of Wellington, the surrounding region, and some of the South Island. It was made from seven photos taken with a hand held camera from the Mt Kaukau lookout. I've attached the full sized image, Wellington panorama from Mt Kaukau, for download.