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Airplane.

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Air travel is usually the most expensive option but if you’re in Europe or Asia there’s some great Budget Airlines which can be significantly cheaper than all other options. One thing to keep in mind though is that even with these cheap options, the savings of time and money aren’t always what they seem. Many budget airlines fly into smaller airports far outside of the city center. For example some domestic flights to Sao Paolo, Brazil depart and arrive at Sao Paolo Viracopos airport and not Garulhous. The Viracopos airport is nearly 100 km away from downtown. Flights can also arrive or depart at inconvenient times requiring an expensive taxi ride to the center.

RTW ticket?

I think these aren't the best option because it prevents flexibility and doesn’t really amount to much of a savings if there even is one. However, it may be an option if you want to jump all over the world and only have a few months. Check to see if the sum total of separate flights is significantly more expensive than a RTW ticket. If not, it’s definitely worth having the flexibility. You never know what will happen.

Booking Tips:

I usually use a combination of Kayak, Skyscanner, and Google ITA to book my flight tickets. Sometimes other search engines such as Priceline or Cheapo Air show prices $10 or $20 cheaper so it depends on how willing you are to spend time to shop around. Make sure you book with a reputable travel agent, lesser known companies are cheap for a reason. If you happen to have any problems with the flight it becomes a nightmare to go back and forth between the booking company and the airline.

Research shows that 3-10 months prior to the flight is the sweet spot to obtain cheaper tickets. Strangely enough Tuesday is the best time of the week to search.

Map Happy has a good article on changing the point of sale to score cheaper tickets. Worth a read.

One other option is to look into nearby airports. For example, it’s sometimes cheaper to fly into Copenhagen via Norwegian Airlines and taking a separate flight to Prague with another company than flying directly to Prague.

Transit Issues:

Be careful with visa issues as well when booking flights. Search engines will sometimes use several connecting flights to get you to your destination. They will list a domestic connection in a transit country using the same exact plane.

Here’s what happened to me:

Santa Cruz, Bolivia (Flight 971)—->Iquique, Chile

Iquique, Chile (Flight 971)—->Santiago, Chile

Santiago, Chile (Flight 6017)—->Sao Paolo, Brazil

Both the airline (LAN) and the booking agent (Orbitz) told me that because the same plane was being used for the first two flights I was not going to leave the plane. As a result I would not go through immigration and pay the Chilean reciprocity fee required for USA citizens. Then I would transit in Santiago by switching planes. This was and is never the case. Upon arriving in Iquique all passengers had to leave the plane and go through immigration.

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Bus.

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Buses are usually the cheapest and most frequently used transportation option.

They are highly variable in comfort, quality, and size. Many South American countries such as Chile, Argentina, and Peru have an excellent long distance bus system. You get served food and with a little extra money can recline your seat all the way down to form a bed. On the other end of the spectrum are buses where people smoke in (Indonesia), ones with barely any floor (India), and buses where passengers refuse to open windows in 40°C heat (Africa).

But buses are also the backbone of any backpacker’s travels so take it in stride. You’ll meet lots of other masochistic travelers willing to save just a few bucks like you. Keep an eye out for cheap deals by booking ahead of time online in more developed countries.

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Train.

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Rental Car.

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Renting a car is sometimes the best and only way to see a country. I’ve rented vehicles in Southern Africa, USA, Australia, and New Zealand. Prices weren’t too outrageous for the most part and sharing costs with other travelers made it quite affordable. If you’re an American just make sure you learn how to drive manual since renting automatic cars can be difficult expensive internationally.

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International Driving License.

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I purchased this from an AAA office before I headed off to drive in several African countries and was never asked to show it. All my previous driving experiences in Australia and New Zealand yielded similar results. As long as your license is in English you’ll probably be fine in most cases. The only time I’ve seen an international license being useful was in Bali when the police set up road blocks to fine foreigners for not having one. The solution for most foreigners was to simply speed past them in the open lane.

**UPDATE - You'll need an international driver's license in Japan and South Korea to rent cars. No way around it. Japan has other strange conditions if you're trying to rent a car again after re-entering the country within 3 months of your previous visit

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Rental Motorbikes 

and 

Motorbike Taxis.

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Renting motorbikes is a cheap transportation option in many Asian countries. I would advise practicing in the countryside before you tackle the insane traffic of major Asian cities. People drive like maniacs so be extra careful. Motorbike Taxis are ubiquitous throughout many regions of the world and the thrill of weaving in and out of traffic in a new city is always exciting.

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Ferry/Speedboat.

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This is a cheaper alternative to air travel but takes much more time usually. Overnight ferries are particularly worthwhile since they tend to be more comfortable than trains and have a lot more space to move around. But be prepared to take one or more other forms of transportation to get to your final destination. Also remember to take some sea sickness pills prior to your departure if you plan on being on a speedboat navigating rough current.

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Hitchhiking.

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This is a great way to save money and meet interesting people. Generally the more out of place you are the more willing people will be to pick you up. However be prepared for plenty of rejection and time standing on the side of the road. Creating a sign with your destination is always a good idea as well. If you want to break up your transportation routine hitch hiking is a great experience. Once you’re picked up by someone you’ll want to do the same when you see a hitch hiker on the road.

Check the Wikitravel page to get a more detailed introduction into hitchhiking.