Recently, I've become a little enamored with doing panoramic images - back in the film days, we used to use panoramic and swing lens cameras to do that kind of job - if you still want to use film, you can check out cameras like Hasselblad Superwide or Fuji X-Pan for film panoramic options.
While I think film produces subjectively better results, there's no reason why you can't use your digital camera to capture a fantastic panorama. Basic requirements are these:
Digital DSLR - 10MP or better
16-35MM lens - you don't want to use a telephoto for this kind of shot
Ability to shoot in RAW format
RAW Editing Software - Lightroom or ACR or something similar. Your pick.
Photoshop CS3 or greater - there are other programs, but I'm going to cover CS3
Tripod is nice to have, but NOT required.
OK, so you have all of those things, now what?
Go out and shoot some pics of something to merge into a panorama and here are a few guidelines.
1. take a look at your overall scene that you want to photograph, and visualize your panorama. Find the brightest part of the image (not the sky, your subject matter) and set your camera to properly expose that part of the image.
2. Use a Tripod if you have one - it's not necessary, but it does help. I can do panoramas handheld, but tripods help in keeping things stabilized, and it helps if you have a panoramic head on your tripod.
3. Shoot 10-15 images of your panorama - and OVERLAP each image. I cannot stress this enough. First image you shoot, move your camera halfway to overlap the next frame, and shoot again, and do the same thing over and over again, till you get to the end of your panorama.
4. Once you're done, go to your favorite RAW editing program, and BATCH edit the entire set - all of them must have uniform color temperature and right amount of contrast - fix exposure problems here if you need to as well. Export ALL images to their own folder with these settings - 8 Bit Jpeg, Adobe RGB 1998, 100 Quality (if you're using Lightroom).
5. Open photoshop, and open all the images that you will be using in your panorama.:
Now, the fun part starts!!!!
Open all your images in photoshop and set them like this in order:

Next, go to File > Automate > Panorama like in this screenshot:

You'll see a dialog box pop up, and it will ask you which images you want to photomerge, and it will give you options as to which way you want to merge all your images - Auto is a pretty safe way to go, but sometimes I like to use Perspective setting. Click on the button that says "Add Open Images" to load the images for your panorama. Screenie!

Once you've selected which images you are using, click OK. Then it will do all the steps required to do your photomerging - be patient, this step takes time, and also depends on your computer's number crunching power. Go watch a tv show, get dinner, have a romantic moment with your loved one, whatever :D.

Once you're done, you're likely to end up with something similar to this:

Next step to do in this process is to crop and then Flatten your image - remember, this is a big panoramic sized image, so you might end up with huge file sizes like 130MB or even 250MB per panorama. It's all dependent on how many images you've choose for your project.




You can do your final edits to fit your tastes after the panorama is done! Here is mine:
