Nemmet -- Joanna Newsom's "Ys" was guaranteed to be a hit. I mean, look at the name!!! In all seriousness, the album is fantastic.
My tastes vary a good bit from a lot of people on this board, but here are my (non-VGM) 2006 picks, in no particular order:
Anathallo - Floating World - an indie band with lots of members doing unique things released their first FULL ALBUM (after being together for about 6 years) in the form of a "concept album." It's all based on a short story (and some poems) that come from various Japanese folk tales/legends. The packaging for the album is superb, and the entire story (Hanakasajijii) is put in the album for you to read. If you aren't in some state of awe by the end of your first listen, you probably weren't paying attention.
DragonForce - Inhuman Rampage - Neal also mentioned this one. It's a fantasy metal band, and if you haven't heard of them, you're way out of the loop. Personally, I liked 2004's "Sonic Firestorm" a little more, but this album is also great.
Copeland - Eat, Sleep, Repeat - The band's third full album was just released in November, and while it has virtually no resemblance to their first two albums (other than the sweet, smooth vocals), it has quickly become a favorite listen of mine. The lyrics are easily the worst thing about the album: contrived, cheap, and "softcore emo" (sort of like "emo lite") to be sure. But the music is darn sweet.
mewithoutYou - Brother, Sister - Another band's third full album, this one came in September. Vocalist/lyricist Aaron Weiss is probably one of the best lyricists alive (to my knowledge anyway). I'm not sure if this album is my favorite of the three (the second, "Catch For Us The Foxes," was solid gold from beginning to end) ... whatever it is, it certainly beat the pants off of most other albums this year.
Sufjan Stevens - Songs For Christmas - This five disc box set contains EPs that Sufjan recorded personally each Christmas since '01 for friends and family. This year, he decided to release them all together in one box: and for $18, it's an excellent deal. The split of new, original, Sufjan-written songs and classic, overdone, unoriginal Christmas songs is about 50/50. And Sufjan spices the old songs up pretty nicely too. The album also comes with a 50 page book including some excellent essays and commentaries on the commercialization of the holiday season, as well as some short stories from Sufjan that help give a feel for why he actually dreads late December and struggles to reconcile his personal feelings about the holiday with all the cheap plastic mirth he finds around him. It was probably the perfect gift for the intellectual in your life, but you'd be a tad late giving it now! :P
Danielson - Ships - If I'm not mistaken, this puppy marked the 8th full album release from Danielson (if you count "Familie," "Brother," and "Tri-" as all the same "Danielson" entity). I've listened to most of those albums, and I own a few of them, but this was really something special. Pitchfork Media gave the album rave reviews, which is what sparked my interest. If you know nothing about the Danielson phenomenon, go here: http://www.danielsonmovie.com/ and read up.
That's it from me. If I had to pick a favorite, it'd be a toss-up with Anathallo and mewithoutYou. But I just love their styles in general...