Inkscape
Inkscape is an Open Source vector graphics editor, with capabilities similar to Illustrator, Freehand or CorelDraw,using the Scalable Vector Graphics (SVG) file standard.
We've been using it to design badges for a little over two years, and it's a fantasic program. It runs on Windows, Mac OS X, FreeBSD and Linux (we run it on FreeBSD, because we're the leetest badgers on the block).
You can download it for free at http://www.inkscape.org/download.php
If you've never used opensource software before, you might be interested to read why the BBC Open Source some of their code
Related Pages: Scribus