I've looked at a handful of price watching services, but this one has got to be the coolest. It's called Pricepinx, and it's been designed to work on any site--not just some of the big retailers.
All you have to do to get going is add a small bookmarklet to your browser, highlight the price of the item and click on the bookmarklet. If there are any changes in price, you'll be notified by e-mail. As an added bonus for those who register with the service, added items are pooled together in a list. You can also sign on as a guest user and get any updates to whichever e-mail address you specify.
Besides individual pricing, the service is a hive-mind for tagged sale items. Each Pricepinx item that's added to your list also goes public, and the biggest droppers and most added items are served up in individual lists you can browse and use to hunt for deals.
The one major snag I can foresee with this tool is companies changing page designs, or not picking up on potentially important limited time rebate information that's not reflected in the total cost. The example I've picked below is Newegg, which frequently offers product rebates that might not always be reflected in the list price, but that can potentially save you a lot of cash. Pricepinx also doesn't work with some sites that dynamically generate pricing based on location, or any of the Gap Web sites.
Related: Use the Web to watch for price drops