Here is a simple, free app that I know my students are going to love experimenting with, given its immediacy and knock-out end result.
www.wordle.net is a piece of sheer brilliance. Add text, or link to a website/blog, and Wordle transforms this into an instant Java based text mashup. There are plenty of options to play around with, including a range of cool fonts, text layouts and colour combinations.
Showing is often better than telling, so here are some results: my Delicious social bookmarking entries (a nice word cloud above), the opening to the Aeneid, and some of my poems. I've also begun to play around with simple aphorisms, and that's going to be an ongoing experiment. If you click on any of the images they'll take you to my space on Flickr. Click on the 'All Sizes' option above each image and you'll be able to see a larger version.
The more times you repeat a word the more prominent it becomes. Cut and pasting can produce some interesting results. There's a lot that can be done with this nifty piece of software. Enjoy.