There are several ways to promote that are free. Facebook and Twitter are both popular. I wrote about Facebook pages a couple of weeks ago. Blogs are also popular, though I have to admit I'm not sure mine is benefiting me much since it's so ugly! A well-designed blog with interesting content can definitely be a promotional asset, however. Also, the new set up of the Community pages has spawned hundreds of promotional teams. I'm the leader of one, called the SNS Saturday Night Specials team, and the member of a couple of others. Using teams to promote is also a good way to network with other crafters and make friends, so it's doubly beneficial.
Paid advertising is always an option too. One method of advertising is Etsy's "Showcase" spots, available for $7/day in a category. I found several blog posts detailing seller's experiences with the showcase, but none recent. Etsy has made some changes to the Showcase feature recently which may change the viability of this feature-- Read this thread from December. RobWhite announced that Showcases were being "pruned", so I would personally recommend avoiding this paid option until Etsy gets all its ducks in a row.
Off-Etsy advertising on blogs and other sites is another option. EtsyNEAT leader PilousPercilla has experience in this area, so I asked her to write a bit about her experiences: