Types of bicycle

There are basically three major types of non-folding bicycle:

Road/racing: narrow tyres, very lightweight, dropped handlebars. Nice for going along very fast, not so good for shifting kit. Fine if you're never going to need to ride across mud or gravel. Tend to be pricey. Many bikes are pushed to look this way, because people buy what looks like racing cyclists' kit.
Mountain (MTB): thick knobbly tyres, heavy frame, usually suspension of some sort at least in the front. AVOID any bike with suspension (front and/or rear) under around 600 quid new price, because the suspension will be crap and more trouble than it's worth. Good for rough terrain, tend to be too heavy to cope well with sudden moves in traffic, but will get the job done. Most of the really cheap nasty bikes will be MTBs because that's what's been fashionable for the last twenty years or so.
Hybrid (what I have): mixture of the above, medium-size tyres, no suspension, medium-weight frame. Can cope with limited off-road stuff while being light enough to be nippy in traffic. This is generally the only sort likely to be available with hub gears.

There are also "urban" bikes (basically hybrids with a bigger price tag as far as I can tell), tourers (I'm not sure what really distinguishes these), recumbents (look like lots of fun but I haven't ridden one), and so on...

Folding bikes occupy a continuum. At one end is something very close to a conventional bike, that folds to take a bit less space in storage (Dahon make a lot of these); at the other is something that'll go into a genuinely small space, with dirty bits folded inside. Brompton is the canonical brand for these. There are also the tiny-wheeled gimmick bikes like the Sinclair A-bike and the Strida; some people like these, others hate them. I have a Dahon Curve SL, which is reasonably compact but only has two more hinges than a standard bike; it's not as comfortable a ride as my full-size-wheel bikes, and I wouldn't have wanted to learn to ride on it, but it's entirely adequate for ten-mile runs into town.

There's more information about different bike styles here.

I like hub gears for the lack of maintenance; other people like derailleurs for the slightly greater efficiency (and much lower cost, these days). Derailleurs will give you a wider range of gears, which is great if you're racing or jumping off mountains; hubs let you change gear while you're not pedalling, which is dead handy if you're in traffic and have to stop unexpectedly. If you do go for hub gears, look for the Shimano Nexus 8, which is a lovely 8-speed unit; 3-speed is still available, but you'll probably struggle on hills.

If you're going to be doing lots of riding on unlit paths, give some thought to getting a dynamo hub - it's much easier to get this with the bike than to add it later.

The larger the wheel, the better an unsuspended bike will cope with an irregular road surface (but the more air resistance you get - not generally a factor in local riding). This is why folding bikes tend to have suspension. If you're getting a hybrid, a 700C wheel is probably a good idea; one of my bikes has 26" wheels, and that's acceptable but somewhat bumpier.

If you're planning to carry any significant load, make sure the bike has mounting points for a rack.

Where to buy (new)

Join the London Cycling Campaign a couple of weeks before you plan to get a bike, because it can take a while to come through - and many bike shops offer a 5-10% discount to members. See the web site for a list. I made back my membership fee in discounts on accessories even though I didn't have the card in time to get a discount on the bike itself.

The basic options for bike shops are:

A big chain - Evans, Halford's or similar. I'd definitely recommend avoiding Halford's for servicing, but their Carrera Subway 8 is a surprisingly good bike (using Nexus 8 hub gears). I don't much like Evans; they have branches all over the place, but while their shops are large they stock a very limited range of bikes.
A big shop in town - I got my first bike from Condor Cycles, where they're fairly sporty and condescending but they do have a decent range of cycles. I have also heard good things about Bikefix, though I haven't used them myself.
A local shop - whether or not you're going to buy there, make friends with your local small cycle shop; they'll generally be happy to service anything, whether or not they sold it, and it's extremely handy to be able to get the bike to the shop when it's broken down for some reason. On the other hand they probably won't have very many different bikes in stock; if you want hub gears, for example, you'll almost certainly have to go elsewhere.
The internet - quality varies hugely, so it's probably a good idea to avoid "own-brand" bikes. Absolutely avoid Sterling House who are notoriously bad. The Edinburgh Bicycle Cooperative has a range of bikes it doesn't sell elsewhere (particularly the Courier Nexus and Pathfinder Nexus, using the Nexus 8 hub gearing system), which have had generally good reviews on uk.rec.cycling though I haven't ridden them myself. For general bikes, I've had good experiences with Discount Bicycles - when one of the components of a bike I ordered from them was damaged in shipment, they got a new one in the post to me on the same day I told them about it. Wiggle is quite popular on urc.

If you've picked a particular model, don't bother shopping around in person; the prices are set by the distributors. An Internet source may well be cheaper.

The basic problem with buying a bike over the net is that you won't be able to check whether it's a comfortable fit; frame size is a good starting point, but different manufacturers use different definitions, and the ideal frame size for an individual varies between different sorts of bike anyway. See this page on the EBC web site for more information on sizing.

Note that any bicycle shipped to you will be flat-packed and you'll have to do a certain amount of assembly on it. This is why it's handy to have a local bike shop - they know just what needs to be tightened how far, and what can go wrong...

Any shop that sells a new bicycle should offer you a free tune-up for about six weeks later (as the components bed in). If they don't, stay clear!

Where to buy (second-hand)

Some bike shops sell second-hand cycles. This is relatively rare, though.

Gumtree, Craig's List and eBay are popular bike sale sites. There is a distinct risk of receiving stolen goods, however. This is even greater if you buy from a local market; Brick Lane is particularly notorious.

The Metropolitan Police auction off stolen bikes that they've seized (either in person or over the net, where the frame number hasn't been reported to them and therefore they can't find the owner. Don't expect to be able to ride it away; take a pump at the very least.

Freecycle-London has a few bikes a week; the condition varies hugely, from "only fit for scrap" to "rideable immediately". Be prepared for a lot of driving round London.

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