At times I’ve tried a few different solutions for a WordPress-powered photo gallery. There are lots of options, including plugins and custom post types. Theme matters a lot, here. ma.tt has a pretty impressive setup (as you would expect from the creator of WordPress), though I’m not sure where all the magic comes from.
So, have you implemented a gallery? Did you use built-in functionality, or are there some plugins you found helpful? What sorts of challenges did you face, e.g., needing to pick a focus/highlight image to represent the set.