@doingyboy: If you have a smartphone, TIM has a great deal, called TIM Welcome. For €30, you get a SIM, 2 GB of data (4G speed where available), 200 minutes of calls good both for domestic calls in Italy and for calls to many international destinations (including the US), and €5 of credit for texts or extra calls. This is all good for a month. On my recent trip to Sicily, my friend got this and it worked great. The only problem was the the TIM store in Rome Fiumicino Airport Terminal 1 did not have nano-SIMs, so we had to wait to buy it in Palermo.
I don't have a smartphone, so I paid €20 for a SIM and €15 of credit for talk and text. The airport shop had mini- and micro-SIMs, so I was able to get mine at the airport without difficulty. You will need a passport, and may or may not need a codice fiscale; see the bottom of this page for details: http://www.prepaidgsm.net/en/italy.php. Be sure when they set up your phone that they set up the voice mail prompts and the balance updates in English.
On all Italian cell phone plans (and all European phones for that matter), you pay only to send texts or initiate calls. Receiving calls and texts is free.
@Nigel: "Are you saying that in the US you can just call, say, Panama on your usual plan?"
With many plans, yes; of course, it can cost a lot ($1.99 per minute to Panama on T-Mobile, although you can get much better rates if you sign up for a international package first). Some carriers and plans are not enabled by default for international calls, but many carriers and plans are.