Here is just a quick summary of what I use to create in SecondLife.  There are a number of programs out there, both free and costly, designed to help SecondLifers build and create.  Here are some of the programs I use:

AvPainter:  This was one of my first purchases in 2008.  It allows you to draw right on top the SL Avatar and export the drawings.  You can even use layers and it automatically exports in 3 different formats.  It does cost around $20 but so far has been worth it.  Download the demo here.

ZBrush: From pixologic, this is where I began sculpties thanks to Shiny-life (which is sadly no longer available).  However, this program is VERY pricey. Click here to visit Pixologic.com.

Blender: Blender is free, the UI is a little hard to learn, but there are many video tutorial on how to use it specifically for Second Life.  Blender can be downloaded for free here.

Tatara: From the Kanae Project Tatara is an awesome program you don't have to install.  It allows you to edit a sculpty or mesh in a couple different modes, texture it and export it.  It is available for a little over $20.  There are many tutorials and a trial product can be downloaded here.

Photoshop: Also can be pricey, but it is essential for me.  I use it to create textures, edit photos and sketch out ideas.  The extended versions can even work with 3d too.  However, if its out of budget theres always

GIMP: This program operates similar to photoshop with working layers, but is available for free.

That's kind of the overview, once in a while I'll try small programs here and there to see how it can make my Second Life easier because I can be absolutely lazy!