Israel's currency is the shekel, also called shekel hadash (new shekel); its name derives from an ancient biblical currency; the shekel replaced in 1980 the older Israeli pounds (lira yisraelit), which are now collectibles. Due to extreme inflation, the currency was again changed in 1985, hence the "new" shekel. Pay attention if you change money on the black market, they may try to give you pre-1985 out-of-use bills. On the flea market, you can also find Palestinian pounds, which were issued by the Palestine Currency Board during the British Mandate; their face value was written in English, Arabic and Hebrew, and was equal to the British pound.
The common abreviation for the new shekel is NIS for "New Israeli Shekel", or a combination of Hebrew letters shin and het (שח) for shekel hadash. Plural is shkalim.
One shekel is divided in 100 agourot.
Coins: 10 agourot, 50 agourot (half shekel), 1 shekel, 5 shkalim, 10 shkalim.
Bills: 20 shkalim, 50 shkalim, 100 shkalim, 200 shkalim. Attention, if you come across 500 or 1000 shkalim bills, they are certainly "old" shkalim, no longer in use.
Face value is written in Hebrew and Arabic, the two official languages of Israel, with a transcription in Latin characters.
Coins are inspired by antique coins and archeological findings, and display biblical Jewish symbols: a menorah on the 10 agourot coin, reminiscent of a coin from the Hamonean time; King David's harp on the half shekel; and a simple lily flower on the one shekel coin. Bills feature Zionist leaders and modern Hebrew writers, among them S.J. Agnon, the father of contemporary Hebrew literature.
1 dollar is currently about 4,5 shkalim, 1 euro is about 5,5 shkalim. To find the current exchange rate, check out the following links (Google converter):
Other currencies in use: dollar, euro are common.
Palestinians in the Territories (see Country : Palestine) use the shekel in everyday life (though they prefer not using the small coins), and switch commonly to dollar, euro and Jordanian dinar for large sums. Some salaries, for example, may be paid in Jordanian dinar.
Major credit cards are widely accepted, and you will find ATMs almost everywhere. Major local banks are Bank Leumi (National Bank), Bank HaPoalim (Workers' Bank), Bank Mizrahi (Oriental Bank). In East Jerusalem, in the territories and some Arab localities inside Israel you will also find the Arab Bank and some Jordanian branches.
You will be able to use your card in most shops and restaurants, but keep some cash for the markets and street food!
Attention, there are almost no ATMs in East Jerusalem, only branches of the major banks.
The usage is fastly shifting from "service included" to "service non included", which is by now the most common case; it should be clearly written on the check. A tip is most welcome anyway.
When service is not included, the tip should be 10% to 20%.
Also, one or two shkalim are usually added to pay for the shomer (the guard protecting you from a terror attack). Technically you have the right not to pay this supplement, but why would you do this? In case of an attack, the guy would probably die so as to save you. And they are usually poor Russian and Ethiopian immigrants.