Windows only: Desktop icon organizer Fences arranges your cluttered desktop icons into containers so you can clean up the mess into useful groups of shortcuts—or optionally hides them altogether.
Once installed, Fences will run through a couple of first-time beginner screens asking if you’d like to use one of the built-in layouts, and will attempt to auto-detect which icons should be placed inside each fence. You can modify any of the fences by simply moving or resizing them around the screen, and then use the Lock item on the desktop context menu to fix them into place when you are done.
The thumbnail on the left shows my cluttered test desktop before, and the one on the right shows the default organizer layout generated by Fences—much cleaner.
Right-clicking on the desktop gives you a couple of new options, including quick and easy access to the settings panel, where you can tweak the look & feel as much as you'd like.
The best feature is the ability to double-click on the desktop to toggle visibility of the icons—but you can optionally exclude certain fences, a very useful feature for hiding clutter while keeping application launching icons visible all the time.
After only a few hours of using this application, it’s already a must-have for keeping my desktop clean and organized. If you aren’t worried about eye-candy and just want to organize your icons, check out previously mentioned Iconoid, or you can hide your desktop icons with a keyboard shortcut instead.
Fences is a free download, works on Windows XP 32-bit and Windows 7 or Vista in both 32-bit or 64-bit versions.
Windows only: If you like the look of 
Pinning a Show Desktop icon to the taskbar in Windows 7 won’t work the way it did in pretty much every earlier version of Windows. While you can still create the “Show Desktop.scf” script, it just won’t pin itself correctly. The Tweaking with Vishal blog offers a kind of work-around that makes use of Windows 7′s utterly transparent toolbars.