I usually apply foundation with my fingers, dabbing and blending where necessary -- it gets the job done. Well, I've been doing it ALL wrong, because I've found a makeup sponge that makes application an absolute dream.
It's called the beautyblender. This ingenious egg-shaped tool has a slightly pointy tip, making it ideal for using around the nose, under they eyes, and even for applying eyeshadow.
How you use it: wet the beautyblender with water (it will grow before your own eyes!) and remove excess moisture with a towel or a gentle squeeze. Put a little makeup on it; pat-pat-pat onto skin and then blend away for a flawless finish!
Seriously, this $20 hot pink thing is a sound investment into your daily makeup routine (and they're not even paying me to say that!).