Software to create timing diagrams
A quick web search turns up Drawtiming.  Never used it, but it looks like it would work very well for brief examples of a few dozen clock cycles.

If you want to do your drawings in an Office-like toolset, try OpenOffice.org, specifically the Draw program.  If you want to generate the best graphics (And don't mind if it takes a while), try Inkscape as suggested by digikata.  Professional datasheets will probably be best served by the tikz-timing package  an as suggested by jluciani, or the older (but less complex) timing.sty, both with (La)TeX (Try Lyx for a shorter learning curve, if you're new to TeX. Be warned that it's a steep curve no matter what, but it's worth it!)

You could also try simulating in GTKWave (or any other circuit simulator with a logic analyzer):

(source: bec-systems.com)  

but that's oriented more towards simulation of Verilog/VHDL/schematics, rather than just drawing waveforms.