I'd like to create 8bit sound tracks for games I develop, old school games, so I want old school music. I'm very new to sound design, and I want to make sure I use the right tool for the job. I'd love to hear your thoughts.
Well you could design your audio in pretty much any DAW and then use a bitcrusher plugin to reduce the bit depth and sample rate. This would be a sample playback emulation. Or, you could seek out some emulations of old hardware. The ReFX quadrasid is a nice option if you go down this route. If you did really want to be a purist, you could try creating sounds with a more authentic emulation like GoatTracker, where you are controlling a SID emulation using the original parameters available to the programmers/composers - fiendishly difficult! But you will develop a healthy respect of what they achieved back then.
I'd suggest hacking a gameboy (or several) and making some bona fide chiptune! There are many resources on the web for doing that.
If you don't have the time or energy for that, check out PulseBoy! It is an in-browser gameboy emulator that lets you bounce your tracks down to .wav when you're done.
The other answers have suggested some really great tools too, all which I own and have played with for fun but never made anything serious with.
Nobody seems to have mentioned the freeware YMCK Magical 8bit Plug: http://www.ymck.net/en/download/magical8bitplug/
For Sega Megadrive flavour sounds there is the amazing VOPM (also freeware!) http://www.kvraudio.com/product/vopm_by_sam
Use them in a VST host of your choice. I'm most comfortable writing inside Ableton Live and the plugs integrate really well.
I have used them both quite extensively when writing music for Cutout Fighter: