Extension tubes are just empty tubes without optics. Their only function is to increase the space between the sensor (film) and the lens. They usually come in set of three. Usually 10mm, 20mm and 30mm sections, or thereabouts. Extension tubes are very popular choices for macro, because it can be used with pretty much any lenses in your system and depending on the length of the tube, and the focal length you use, it can achieve 1:1 or even higher magnifications. Because they do not have optics in them, image quality loss is not significantly affected.
Some older macro lenses that could not achieve 1:1 magnification ratio usually has an optionally matched extension tube which, when mounted, makes the macro lens capable of 1:1 reproduction.
The Good -- Image quality not severely affected. Cheap (relatively), high magnification ratio.
The Bad -- Loss of light (stops depends on length of tube used), can not focus to infinity.
Matched Extension tube & General Purpose Extension Tubes. Larger Picture.
Focal Length Extenders (or Teleconverters)
Teleconverters are by far the most popular and usually the first choice for many. Teleconverters serve two purposes: Multiply the focal length & increase macro capabilities of a lens. Teleconverters usually comes in 1.4x or 2x multiplication ratios. 1.4x is the most popular as the light loss is equal to 1 stop, whereas 2x converters loses 2 stops. Also, good 1.4x teleconverters has mimimal image quality loss when mated to a good lens, and 2x converters usually have visible quality degradations. One of the most desirable aspects of a teleconverter is that it allows the lens mated to it to focus to infinity. As with most things in life, good teleconverters are very expensive, sometimes equal to a good macro lens.
Older teleconverters sometimes has a focusing ring that varies the magnification. Most of them allows a 50mm lens to get 1:1 reproduction ratio.
The Good -- Can focus to infinity, 2x the macro capabilities when using a 2x converter, minimal quality loss using a good 1.4x converter
The Bad -- Expensive, quality degradation when using a 2x converter, light loss
Canon 1.4x Teleconverter. A new one costs more than $400. Larger Picture.
A 3x teleconverter with variable macro capabilities. Larger Picture.
To conclude -- you don't have to shell out a lot of cash to enjoy macro photography, but if you are serious about macro, be ready to spend some money for quality accessories, and may be a real macro lens.