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There are many packages to do pictures in (La)TeX itself (rather than importing graphics created externally), ranging from simple use of LaTeX picture environment, through enhancements like eepic, to sophisticated (but slow) drawing with PicTeX. Depending on your type of drawing, and setup, here are a few systems you may consider:

• The picture environment provides rather primitive drawing capabilities (anything requiring more than linear calculations is excluded, unless a font can come to your help). The environment’s tedious insistence on its own \unitlength, as the basic measurement in a diagram, may be avoided by use of the picture package, which detects whether a length is quoted as a number or as a length, and acts accordingly.
• epic was designed to make use of the LaTeX picture environment somewhat less agonising; eepic extends it, and is capable of using tpic \special commands to improve printing performance. (If the \specials aren’t available, the eepicemu will do the business, far less efficiently.
• pict2e; this was advertised in the LaTeX manual, but didn’t appear for nearly ten years after publication of the book! It removes all the petty restrictions that surround the use of the picture environment. It therefore suffers only from the rather eccentric drawing language of the environment, and is a far more useful tool than the original environment has ever been. (Note that pict2e supersedes David Carlisle’s stop-gap pspicture.)
• PicTeX is a venerable, and very powerful, system, that draws by placing dots on the page to give the effect of a line or curve. While this has the potential of great power, it is (of course) much slower than any of the other established packages. What’s more, there are problems with its documentation.
• PSTricks gives you access to the (considerable) power of PostScript via a set of TeX macros, which talk to PostScript using \special commands. Since PostScript is itself a pretty powerful programming language, many astounding things can in principle be achieved using PSTricks (a wide range of contributed packages, ranging from world mapping to lens design diagrams, is available). Pstricks’ \specials are by default specific to dvips, but VTeX (both in its commercial and in its free versions) understands them, and there is a Pstricks ‘driver’ that allow Pstricks to operate under XeTeX. PDFTeX users may use pst-pdf, which (like epstopdf — see PDFLaTeX graphics) generates PDF files using an auxiliary program, from PSTricks commands (pst-pdf also requires a recent installation of the preview package).

  There is a PSTricks mailing list (pstricks@tug.org) which you may join, or you may just browse the list archives.

• pgf: while pstricks is very powerful and convenient from ‘traditional’ TeX, using it with PDFLaTeX is pretty tiresome: if you simply want the graphical capabilities, pgf, together with its “user-oriented” interface tikz, may be a good bet for you. While PDF has (in essence) the same graphical capabilities as PostScript, it isn’t programmable; pgf provides LaTeX commands that will utilise the graphical capabilities of both PostScript and PDF equally. Pgf has extensive mathematical support, which allows it to rival PSTricks’ use of the computation engine within PostScript. The pgf manual is enormous, but a simple introduction which allows the user to get a feel for the capabilities of the system, is available at http://cremeronline.com/LaTeX/minimaltikz.pdf
• MetaPost; you liked Metafont, but never got to grips with font files? Try MetaPost — all the power of Metafont, but it generates PostScript figures; MetaPost is nowadays part of most serious (La)TeX distributions. Knuth uses it for all his work…

  Note that you can “embed” MetaPost source in your document (i.e., keep it in-line with your LaTeX code).

• You liked Metafont (or MetaPost), but find the language difficult? Mfpic makes up Metafont or MetaPost code for you using familiar-looking (La)TeX macros. Not quite the full power of Metafont or MetaPost, but a friendlier interface, and with MetaPost output the results can be used equally well in either LaTeX or PDFLaTeX.
• You liked PicTeX but don’t have enough memory or time? Look at the late Eitan Gurari’s dratex: it is just as powerful, but is an entirely new implementation which is not as hard on memory, is much more readable and is (admittedly sparsely) documented at http://www.cse.ohio-state.edu/~gurari/tpf/html/README.html, as well as in the author’s book “TeX and LATeX: Drawing and Literate Programming”, which remains available from on-line booksellers.

In addition, there are several means of generating code for your graphics application (asymptote, gnuplot and MetaPost, at least) in-line in your document, and then have them processed in a command spawned from your (La)TeX run. For details, see question.