We're researching this for our bathroom and thought we'd share a good instructional at How Stuff Works with you. Installing recessed shelving between studs is a good way to add extra storage space to a room without taking up any square footage. It's good for the bathroom, as the shelves end up being shallow but can hold small bathroom accoutrements. Or this can be done in the shower and tiled as a niche for shampoos and stuff.
We also came across these Stud Buddies, which are shelves made for installing between exposed studs in unfinished spaces, like garages. However, they could work in a niche that is finished at the front and back but has the studs exposed on the sides. And we kind of like their industrial look and the fact that these shelves protrude from the niche, giving them a little added depth.