I use strands of white holiday lights like these or
these (often cheap on December 26!), powered by a heavy-duty extension cord that is plugged in in the garage, with plastic and electrical tape around plugs that are outside (the second strand plugged into the first, etc). I've had no safety problems since starting to wrap the plugs; before I did that, one year I tripped a GFI. These lights are designed to be strung on people's houses and in their windows and the bulbs do not get hot enough to cause a risk of fire. I can touch them with my bare hands after they've been on for hours without issues.
Update: Since writing this answer three years ago, LEDs have become much less expensive. This strand costs $15, burns only 8W, and generates a lot of light according to Isaac Moses (thanks!).
I run the strings up the side of the door (tying it in place once near the bottom and once at the top) and then run it along the top of the walls all around, just tying it in the corners. (A system of clips could make that faster, but it takes me about 3 minutes to put up my lights so I haven't bothered.)
For my 8x8 sukkah this provides ample illumination, but for a bigger one I'd just add another strand and run them across the "ceiling" too, in addition to along the walls, or double the strand along the walls. These lights are designed to be daisy-chained to a point. While I haven't done this myself, I've also seen sukkot that add a single larger light (sometimes LED) from the center; that gives plenty of light but is more expensive than the strands of smaller lights.
As for operating costs, during chol hamoed I just plug the lights in before using the sukkah and for yom tov I just leave them on. A timer would reduce the wasted electricity on yom tov if you're concerned about that.