Popular mic models are for example the Shure SM57 (great all-around and works great for electric and acoustic guitars) or the Rode NT series condenser mics. There are hundreds of mics on the market and a big factor is how much you're willing to spend. If you need to do studio recording probably the best choice is a condenser mic, but they typically cost a few hundred if not thousand $.
You can find out more about mic prices for example at http://www.sweetwater.com. Also see the mic FAQs at http://www.harmony-central.com/Recording/faqs.html
A big leap in the audio quality can usually be obtained by using an external mic preamplifier (for example a small analog studio mixer such as the Mackie 1202) and connecting the preamplifier to the soundcard's line input, as soundcard's built-in preamps are generally of poor quality.
Also the recording quality depends heavily on the soundcard. You can find a short list of suggested soundcards in this FAQ.
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