Step 2: CHDK: Where the Magic Happens
The secret to all of this is the Canon Hack Development Kit: CHDK.
CHDK is an open source, alternative firmware for many Canon digital cameras. Much like Rockbox or various ports of Linux, CHDK overrides the standard operating system of your camera, allowing for much greater user control. Most Canon cameras, from the low end point and shoots all the way up to the high end DSLRs run on the same Digic processors, and contain much of the same internal hardware. The functions of these processors are limited in the low end cameras by the native firmware, but their capabilities can be unlocked by the CHDK firmware.
Specifically, CHDK allows you to create and run macros, or a series of commands that are set in motion and continue without requiring you to be there at all. Rather than requiring an expensive high end camera or an analog intervalometer, CHDK allows you to set an interval for pictures, and it will continue taking them as long as it has power and space on the SD card.