Forget about marketing for a second. Is your product compelling? The first thing I always look for when developing something new is whether or not it gives me an "ohhh" response once I see the initial concept in action. To be specific, as you are working on your project have you had the moment where it does something unique and you suddenly see that your idea has real potential? Or conversely, have you spent a lot of time working on your idea but you haven't had that moment of realization? If so, then unfortunately your project might be dead on arrival.

I am working on something right now that started as an idea that popped into my head. I took 6 hours writing the core part of the app, then let it run for a couple days. As I started using it myself, I had that "Ohh!" experience. To me, that's what tells me this can be a very compelling experience and why I'm pursuing further with it.

So if your product is compelling, then you've already gone 80% of the way there. The last 20% is the hard part. Find the audiences that will use what you're building. Demonstrate it for them. Free access, full-on support to your initial base of users, etc. Devote yourself to answering people's questions. You will find that word of mouth happens very easily when people are excited about what you're doing.

When you have introduced it to your core audience, which will be very small to begin with, then look around at media outlets. These days media outlets range from popular forums about the niche you are filling, to blogs and related mass-media publications. Getting on Techcrunch is cool. Its a good way to get some exposure. Hacker News itself is becoming a good place to launch, because the community is still very small and much more devoted to trying new things. I used to get hit occasionally by Slashdot and Digg, and that traffic was good for big spikes, but I would only see about 1-2 percent overall traffic boosts after that overally. However, that was an extra 2 percent I didn't have before.

Now, once you are established and have a small but active user base then you might consider bigger venues for advertising. Buying ads on popular sites like Digg and Techcrunch can help. Its very targeted, which is what you want. If you want some Google juice, oddly enough doing press releases can help. I started a company in the beginning of 2007 and we were paying about $150-$200 for press releases a few times a month. We didn't see huge amounts of direct web traffic, but it was really good for getting the word out. People in the financial industries (who pay more attention to press releases than the rest of us) were talking about us and daily I was seeing our name being talked about in the niche circles we were targeting. The co-founder was invited to interview on a few radio shows, which helped after that. (Sadly the company is defunct now. That's how startups go. However that was not because of the advertising and word of mouth.)
Don't spend a ton of money on press releases. If your target audience is general web users, then releasing a press release 4x a month will do bollux for you. If you're targeting businesses, then press releases can be more helpful. But still be careful.

The last thing that I can suggest, is remember your users are "customers" and NOT "consumers". You can always tell a marketing shill versus a true entrepreneur by how they refer to people. Everyone forgets that before the 20th century, consumption meant you had tuberculosis. Then that term got morphed to refer to "the dirty poor masses that buy the rotten horse meat we sell them as hot dogs." I am a customer, a user, not a consumer. Remember that if you treat your potential audience with respect, your users, then they will respect your product and that goes much further than any dollar spent on marketing.