Potrace
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Potrace is an open source, cross-platform computer program which converts bitmapped images into vector graphics. It is written and maintained by Peter Selinger.
Various frontends are available for Potrace. Notably, it has been integrated with Inkscape, giving Inkscape its Trace Bitmap action. FontForge can use Potrace to import a bitmap image into a font. CR8tracer is a simple Windows GUI based frontend.
Potrace's input and output is black and white (colored images are converted to bitmap before processing). However, Inkscape is capable of producing color images by decomposing each channel into several black and white images and tracing them separately with Potrace. The commercial Total Vectorise program also uses Potrace as its core.
Potrace is licensed under the GPL.