I was in the process of making an old office into a studio. I've heard egg crates are a good way to insulate the walls but would the insulation you get at the local hardware store do just as good for a lower price?
DON'T DO IT!!!
Egg crates will do NOTHING to insulate the walls. At best, they might act as a very poor diffuser, but they will give you no sound insulation at all, or do anything good for the acoustics.
There have been books written on acoustics and acoustic treatment for studios, and I'm not an expert on that side of the field, but I do know enough to work with those who are when I was doing my studio remodel.
First of all, you need to recognize that there is a difference between acoustic insulation (sound proofing) and acoustic treatment (taming the acoustics, or "sound", of the room).
If you are on a budget and have some construction skills to do it yourself, then I highly recommend you visit the John Sayer's Forum for tons of great acoustic articles and DIY acoustic projects.
For making your room sound good for recording and mixing, with proper acoustic treatment, if you don't want to do it yourself, then there are two companies that I highly recommend. I've bought acoustic products from both of these companies and can verify that they work as advertised!
Good luck with your studio!