The emulator that comes with ADK for use under Eclipse is fine for testing basic Android application functionality, but:
For me test devices are sort of like pickup trucks: I'll make friends just to get access to their phones ;-)
Seriously, I do tap friends and family as resources. I'm a small shop and can't afford to buy a lot of test devices. Yet even with this limited pool of resources I've go the following devices available and it seems to have served me well:
So, as you can see, without spending a fortune I've got a pretty good set of test devices, not counting all the friends I press into service as beta-testers. With all those I really haven't had many problems with platform specific issues. I hear a lot of grumbling about fragmentation (perhaps mostly from iOS developers), but if you develop your app intelligently it isn't a huge issue.
I have own collection of devices:
At this stage I'm just testing with two phones:
There's a pretty big difference in the perceived density between these phones, so it's been helpful for comparison in testing my own games. The major omission at this stage is a tablet - just haven't been able to justify the cost yet.
I'm also playing around at the moment with LCDDensity for Root which allows you to change the screen resolution on-the-fly. Interesting to see what the same sized screen would look like with more pixels stuffed in (i.e. closer to Retina display)