Here is a shot of the different series of camras that Canon has to offer:
There's several models of Rebel, then there's the 50D, the 5D, and the 1Ds.
Broadly, which one is for whom broadly?
The Canon Rebel or EOS XXXXD Series
The Canon 60D or XXD Series
The Canon 5D Mark II/5D Mark III
The Canon 6D
The Canon 7D
The Canon 1 Series
Now, that isn't to say you can't use the 1Ds for sports, or the 1D for studio work. Either will work, just that the 1D has more features specific to action, compared to the 1Ds.
That also goes to say that you couldn't be a professional photographer using Rebel bodies. All these camera's, when used properly, are capable of producing AMAZING images. It's more that the Canon 1 Series is designed to be used abused in a daily basis, where as the Rebel is not.
Canon have different names for cameras in different parts of the world, so let's start with a translation table for those:
The numbering system on the left is intended to tell you how advanced the cameras are. EOS 1 is the professional end, and EOS 1000 is the least feature packed model.
So, generally, the lower the number, the more expensive the camera is. However, a newer camera in the same segment gets a higher number, so 550D is the replacement for 500D.
Canon has an odd numbering system and they adjusted it over the years too, so it not entirely consistent (no manufacturer is but Canon is one of the bigger offenders).
All Canon DSLRs actually have a model number which is used in Europe. In America these are replaced by letters such as XS, XSi T3i, etc. Asia uses a different naming system (Kiss). For example, the Canon Rebel XS is the 1000D. If you use the model numbers, things are a little easier to sort out:
The a suffix which was only used twice means for Astrophotography.
Broadly, 4-digit models are the absolute basic models with very limited feature sets and interface. 3-digit models are only a tad better with a few more functions and a slightly larger LCD and maybe a few more megapixels.
Two-digit models are mid-range. They share the same sensor with the 3-digit models but have better bodies with more controls and - crucially - dual control-dials. This makes them more efficient to use. The also shoot noticeably faster.
The 7D is the top-end crop-sensor model, sharing the same sensor with the 60D, but offering a weather-sealed body and a 100% coverage viewfinder, which makes it much more suitable for serious use. It also shoots at an even faster rate.
The 5D series is a full-frame model which looks at lot like a 7D but offers improved image quality. The latest is the 5D Mark III which I just reviewed last week. It has an ultra-fast autofocus system which is also shared with the top-end 1D series.
The 1D X is the top of the line in terms of image quality and speed. It has less resolution than the 7D or 5D but higher sensitivity to light and much faster speed. It is also built like a tank with an integrated vertical grip and huge battery.
The Canon range is loosely in ranges aimed at entry-level (the Rebel series in North America, and Kiss series in Japan, and three or four digit model numbers elsewhere), "Prosumer" (those with 2 digit model numbers, such as the 50D) and professional (with single digit model numbers such as the 5D)
At any one time, there may be more than one model in a particular range, with a more specific target audience; for example, the 1Ds series is aimed at studio photography, with a large sensor; but the 1D (with no s) is more tuned towards sports photography, with the ability to do longer bursts of photos.
At the opposite end of the scale, there are cheaper options for those on a tighter budget - as an example, the 1000D/Rebel XS/Kiss F uses the older Dig!c 3 processor as well as having a lower resolution sensor than the other Rebels.
As a rule of thumb, higher specs get higher numbers except in the single digit range, when the lower numbers are considered better.
Alan has alread covered the general differences between the ranges in his answer but here's some more detail about the lower end models.
Entry-level: Canon Rebel XS or EOS XX00D Series (e.g. 1000D)
The Canon Rebel or EOS XX0D Series (e.g. 550D, 500D, 450D, 400D)
The Canon X0D Series (e.g. 50D, 40D)
Depending on your location, that list is slightly out of date. IIRC, the XS was dropped, and the 3 'Rebel' cameras are the T2i, T1i, and XSi.
With a budget of ~1000 USD, the 50D is slightly above your price range, and the T2i, slightly below.
The 50D will be a slightly nicer, more professional camera than the T2i. As mentioned above, its more of the prosumer line.
One of the big things upcoming in DSLR's are HD video recording. I personally have the T1i, and love it. The video recording updates on the T2i make this an even better camera at that price. I consider myself just shy of a prosumer when it comes to cameras. Its a hobby and I have done some photo shoots for others, but mostly I do it for fun. And the extra benefit of HD video is nice.
If video on a DSLR is of interest to you - go with the T2i and buy the ~ $100 Canon 50mm 1.8 (an very cool lens). You can sometimes find it around $80 as well. If not, get the 50D, and probably get the 50mm lens anyways :)
There are a number of "families" or groups of Canon DSLRs, and within each group a fairly consistent naming/numbering system is used.
The Rebels, for example, are considered "entry-level" and in addition to the "Rebel whatever" name also have a numeric designation: 300D (Rebel), 350D (Rebel XT), 400D (XTi), 450D (XSi), 500D (T1i), 550D (T2i), 600D (T3i). You can see the consistent xxxD numbering.
"Mid-range" Canon DSLRs currently use xxD numbering (they were originally Dxx, though): 10D, 20D, 30D, 40D, 50D, 60D. The 20Da and 60Da are similar in features to their non-a versions, but have different sensors for astrophotography.
Wikipedia has a nice summary of all the different Canon models at the bottom of this page.
This Wikipedia table ("camera template"):
is always up-to-date, and lists the models by generation and tier, as well as gives information on the processor generation used in each model.
There are similar tables for other brands/types of cameras under the Wikipedia camera templates listing.
Generally speaking, the XXXXD bodies are using an older XXXD model's hardware with a newer processor and sensor. The XXXD bodies are entry-level crop with only a single control wheel and no top-plate LCD. The XXD bodies are prosumer crop bodies, with dual control wheels and a top-plate LCD to help see/change settings without menu diving. The 7D bodies are prosumer crop bodies with more hardware controls and fast-action features (higher frame rate, dual processors). The 6D is a sort of full-frame XXD; the 5DMkIII is a sort of full-frame 7D. The 1DX line are the full frame professional bodies with integrated portrait grip, top of the line autofocus, and weathersealing.
The main thing to keep in mind is that typically, bodies with the same format and same processor generation share the same sensor and processor; so image quality differences will be minimal or non-existent; e.g., the 7D, 60D, and 600D are all Digic 4 cameras with 18MP sensors. The main differences are in the hardware UI (buttons, dials, joysticks, etc.) and other usability features (flash master in the pop-up, menu selections, white balancing by Kelvins, etc.).
The larger the number within a tier, typically the newer the generation (e.g., 10D, 20D, 30D, 40D, 50D, 60D, 70D). The newer the generation and the higher the tier, the more expensive the camera gets.
However, because killing engineers is a bad idea when you're a technology company :), the different tiers do not upgrade from generation simultaneously, so some cameras from lower tiers can move ahead a processor generation before higher-tiered models. Typically, sensor and generation advances do "trickle down" but the lower the tier, the faster the refresh cycle. dRebels, for example, tend to get a new model once a year, while the 1DX, 5D, and 7D models may take three or more years between refreshes.
One more note: camera prices depreciate, even while the camera is new, so a model that's been out longer will have fallen farther from its initial MSRP than a newer model, which is why sometimes you'll see new lower-tier cameras that look as if they're close in price to a higher-tiered one (faster refresh); like the current price on a new 70D body ($1000) vs. a new 7D ($1300). But if a 7DMkII comes out, it won't be priced the same, but will be closer to the initial MSRP of the 7D [$1700 in late 2009, body only] (if not higher).