In Illustrator, use the Live Trace feature and play with the settings to get it how you want it. VectorMagic works in a similar way and is free. You can also try this in Flash using the Trace Bitmap function.

Some photos are not conducive to this manufactured treatment of pixels and will need to be redrawn manually. Use the pen tool in Photoshop to redraw your images on a separate layer. (I suggest reducing the colors using posterize or another filter of your choice to simplify the large shapes.)

Layers Magazine has an example here: http://www.layersmagazine.com/illustrator-vector-photo.html