The national currency is the Ugandan shilling, code UGX, sometimes written as Ush. There are 50,000, 20,000, 10,000, 5000, 2000 and 1000 shilling notes and 500, 200, 100, and 50 shilling coins 10, 5, and 1 shilling coins exist but are rarely used.
Some bigger hotels and restaurants do accept US dollars as payment, and safaris and rafting activities eg. Red Chillis in Kampala is often priced in USD. These activities can be paid in UGX, but a poor exchange rate is often offered. Also, there is often an extra fee typically around 4% on the use of credit card. This means that it can be useful to bring USD to cover these activities. The obvious trade-off is that one much carry a large amount of USD around.
ATMs accept debit and credit cards throughout the country. VISA-branded cards are accepted by all ATMs, while MasterCard/Maestro/Cirrus cards are accepted at Stanbic Bank and Standard Chartered Bank ATMs. Different ATMs allow for different maximum withdrawals of between Shs400,000 and Shs2,000,000, though the usual amount is Shs700,000. Many ATMs are located at Entebbe Airport; given that it is impossible to buy Ugandan shillings outside of Uganda and in countries bordering Uganda, withdrawing shillings from the airport ATMs is the easiest option.
ATMs may close due to lack of money or system problems. It is safer to bring VISA cards in case of ATMs issues. MasterCard is not accepted in ATMs, but they can be accepted in major banks for a fee. In Kampala, watch out for pickpockets who follow tourists from one bank's ATM to another when cards are not accepted.
Credit cards are accepted at very few businesses, usually the larger hotels and supermarkets. As for your American Express card: leave it at home. AMEX cannot be used except at major hotels and with airlines.
Cashing travellers checks can be difficult. Do not bring them into Uganda.
costs
Food and goods are cheap. On a shoestring you can get by on less than shs25,000 a day, excluding park visits and other expensive activities.
Make sure you bargain for everything you buy around town except in the bigger stores and malls. Never pay face value when buying from the local vendors around town. Hotels can be costly, so if you are a student it would be a good idea to look for a hostel in Kampala.
Most people have to buy a visa when they arrive at the airport currently 2010-May-04 this costs US $50 single-entry 3 month. Bills must be newer than 2003!
Tipping is not part of Ugandan culture and not expected, but that doesn't mean it will not be appreciated.