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There are many options but I go simple: an "iMic" (cheap little USB input) plugged into my Mac. I think it cost about $35, does the job well for the price. And yep, I use the Garageband that came with my iBook G4.
To record acoustic guitar I either a) play into an SM57-->LR Baggs DI Box-->iMic or b) transducer equipped guitar-->Baggs DI-->iMic. I have a pretty decent transducer in one guitar so usually just do that as it is easier than using the microphone (you don't have to keep guitar placement so constant while playing).
I get nice acoustic tone either way. I have more trouble getting good electric tones with Garageband than I do acoustic tone.
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