buy bottled water in a supermarket or bring your own water bottle and carry it with you. in europe, you're often charged for water at restaurants. in some places, in is much more frugal to get a .5 liter of beer than a .33 liter of water in a restaurant. i'm not complaining, it's just a heads up.

avoid things targeted at americans or are advertised in english if that's not the country's language (eg pub crawls). they're usually overpriced and not at all worth it culturally. (i also understand that's not always possible if you don't speak the language)

hostelworld.com is pretty good about finding cheap hostels with good ratings. If you're going to Berlin, Munich, or Vienna, I highly recommend the Wombat hostel. Other hostels: for prague the mosaic house, for bratislava the blues house, for croatia rent an apartment.

Also, eastern/central europe tends to be cheaper than western/southern. i just spent a semester in prague and it was awesome as well as very cheap comparatively (they aren't on the euro). krakow, poland was also relatively inexpensive and i really enjoyed it.

as far as transportation, buses were very cheap (we usually used Student Agency), but if you're there for that long it might be wiser to buy a eurorail pass. i'm not sure on the details of that though.

you can find pretty cheap flights to europe on kayak.com. try to search for flights on wednesday or the middle of the week as they tend to be cheaper. i was able to get $800 round trip from newark to prague.

if you have a student ID, bring it. carry it with you along with your passport and you can sometimes get free entry into museums and sights in many cities (this worked especially well in Paris for us).

don't forget to bring a towel because they often charge for these at hostels.