Bit.ly is by far the best URL shortener. Easy to use and app-integrated, eg in TweetDeck. One of the niftier features URL tracking - both personal and overall traffic to your link. As soon as you shorten a URL, you get a sense of how popular that link is on bit.ly, which is valuable for blog posts and articles (less valuable for a link to say, the NYTimes). Bit.ly has a sidebar web app as well.

Bit.ly is a portfolio company of Betaworks. Twitter made Bit.ly its official URL shortener in March 09. Bit.ly now covers over 50% the URL shortening on Twitter, according to Twitmeme.