I bought a phone and a TIM GSM card...
...through Telestial.com for about $100 (you can get a discount if you book through slowtrav.com); that got me a local Italian number (much cheaper for local calls), and an unlocked phone I can use elsewhere with other phone companies. However, when you arrive in Italy, you can buy a GSM phone at the electronics store at the airport for about $40 and buy a prepaid phone number at a local phone store (if your Italian is good enough).