If you want to purchase a translation of the Bible but don't know which one to pick, read David Dewey's A User's Guide to Bible Translations first. Dewey asks and answers two questions: "Why so many [translations]? Which is best?" Let's take a look at how he answers each question.
First, why are there so many translations?
Dewey's answer to this question revolves around the nature of translation. Dewey distinguishes between form-driven translations and meaning-driven translations. (He also discusses paraphrases, which are meaning-driven, although not technically translations.) Form-driven translations focus on the writer and seek to reproduce his or her words, images, and even sentence structure in their nearest English equivalent. They are also known as word-for-word translations. Meaning-driven translations, by contrast, focus on the reader and seek to reproduce the meaning of the writer's words in contemporary English. They are also known as meaning-for-meaning or thought-for-thought translations.
To understand the difference between these translation philosophies, consider how two recent translations translate Galatians 5.19. In the form-driven English Standard Version it reads, "Now the works of the flesh are evident." In the message-driven Today's New International Version it reads, "The acts of the sinful nature are obvious." In English, works and acts are functionally equivalent in meaning, as are evident and obvious. However, the ESV reproduces the Greek conjunction de ("now") while the TNIV does not. And the ESV provides a literal translation of the Greek noun sarkos ("of the flesh"), while the TNIV translates its probable meaning: "of the sinful nature." Neither translation follows the Greek word order, which is roughly: "Evident now are the works of the flesh," to rephrase the ESV. The basic difference here is between fidelity to the writer's word usage and intelligibility to the reader, with the ESV tending to the former and the TNIV to the latter.
The use of gender-inclusive or gender-accurate language also plays a role in the proliferation of Bible translations. For example, contrast the ESV translation of 1 Corinthians 1.10 with that of the TNIV: "I appeal to you, brothers..." vs. "I appeal to you, brothers and sisters...." Adelphoi is the Greek word for brothers, which is literally translated by the ESV. However, Paul wrote 1 Corinthians to both men and women, so brother is meant inclusively. The TNIV makes this inclusiveness explicit by adding "and sisters" to its translation. Interestingly, some form-driven translations, such as the New Revised Standard Version, use gender-inclusive language; while some meaning driven translations, such as the New International Version, do not. (The TNIV is a substantial revision of the NIV.)
So, why are there so many translations? Basically, because of differences in translation philosophy. Since meaning-driven translations seek to make the biblical text intelligible to the modern reader, it is not surprising that the vast majority of recent translations are meaning-driven. The meaning of English words constantly changes over time, after all.
Second, which translation is best? Dewey quickly surveys scores of English translations from Wycliffe, Tyndale, and the King James Version to modern translations such as the RSV, NIV, NRSV, TNIV, and ESV. He explains the motivation underlying each translation, as well as its relative strengths and weaknesses. Following his survey, Dewey answers the second question with these words: "It boils down to two questions: Best for whom? And best for what? One prepared for adults may not be suitable for children. One that is appreciated by a university-educated person is not usually right for someone whose education finished at sixteen. Similarly, the translation that is suited to personal study may not be the best for reading aloud or for liturgical use. And the one that is good for devotional reading may not be ideal for group study." For the serious Bible student, Dewey recommends reading a Bible from within both the camps of both translation philosophies. And that is my recommendation as well. Currently, I am using the ESV and the TNIV.
I highly recommend A User's Guide to Bible Translations, for people who want to purchase a new Bible as well as for pastor's who need to explain to their parishioners the differences between and relative merits of various translations.