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Note: this tutorial and add-on are no longer relavant as it does not work with BMesh. Blender 2.63+ now includes an inset tool by default, watch the overview here:
This quick Blender 2.5 tip demonstrates how to use the Interactive Inset Extrude add-on developed by Jon Sandström. Using this add-on makes it very easy to model insets with nearly any kind of selection.
The WIKI page with the download link can be found here: http://wiki.blender.org/index.php/Extensions:2.5/Py/Scripts/Modeling/Inset-Extrude
More info can be found on the Blender Artists thread here: http://blenderartists.org/forum/showthread.php?217800-NEW-interactive-quot-inset-extrude-quot-addon!