In case you heard of both setuptools and distribute: distribute fully replaces setuptools. Just use distribute. Setuptools is “maintained” (for various historically dubious values of “maintain”) by one person (whom all should applaud for creating the darn thing in the first place, btw!). Distribute is maintained by a lot of people, so bugs actually get fixed. And “bugs” meaning “it doesn’t break with subversion 1.6 because patches that fix it don’t get applied for half a year”.
update: Obviously this was written many moons ago and a lot has changed in packaging since. And currently (Nov 2013) setuptools is the way to go if you want/need it.