I'm always amazed at how many different types of drill bits I can buy. To try and make sense of all the choices, I've put together the following chart of the top must-have bits that woodworkers and DIY builders use in their shops.
Standard Twist Bits - The Cheap and Easy
Bits Tools
By far the most common and familiar bit around is the standard twist bit. Heck, you can even find these in the aisles of your local grocery store. Not that they are necessarily the cheapest version; there are plenty of expensive, high-quality twist bits you can buy for your drill. This style just happens to be the easiest to manufacture, and so we end up seeing a lot of very cheap versions of these in discount stores.
Best part about a standard twist drill bit (other than the low price) is that they can be sharpened, even with a small hand file from your shop. Even then, I think most people who buy these usually toss them after a few projects, that is, if they haven't lost them yet. Otherwise, with a little sharpening, you can make a standard twist drill bit last for years. The bad part is that the rather blunt end tends to wander around the target, and it can be troublesome to get the hole started where you want it started. Save yourself some trouble start the hole first with an awl or an ice pick.
Pilot Point Drill Bits - A Step Up in Quality
As the name sort of implies, a pilot-point bit has a small, pointed tip that keeps the drill on target when you start drilling. The only drawback is that the added complexity of the design means you probably can't sharpen these bits at home, like you can with standard twist bits. Even then, I'm still willing to pay a little extra for these bits to make things easier in my shop. You'll save money buying a set rather than individual bits, and keep in mind that if you need to drill a hole larger than 1/2 inch, you're better off buying a different kind of drill bit all together, like a wood boring drill bit.
Wood Boring Drill Bits - Size Does Matter
As soon as we start talking about drilling holes in wood larger than 1/2" we need to talk about switching to another kind of bit: wood boring drill bits. Not that you can't get twist bits larger than 1/2" - they're just not the best choice for drilling large holes. Spade bits, augers, and hole saws are a much better match for cutting holes larger than 1/2," not to mention that they are much less expensive than large twist bits.
Specialty Drill Bits - Beyond Drilling Simple Holes
There's not much you can't do with a drill and a fancy bit these days, but some of the more common jobs for a drill bit (other than drilling holes in wood) fall mostly in the category of drilling different kinds of material (like concrete and tile) and drilling, well, larger holes! My favorite specialty bit, though, is called a plug cutter. Like the name implies, this bit will cut a smooth round hole perfectly matched to a common-sized wood plug. This is a perfect way to hide glue & screw joinery in furniture projects, and in most cases, can add a little decorative flair.