Rain can be a big deterrent for cyclists. Being prepared and having the right frame of mind can help out a lot. In general you don't want to wear heavy rain gear in summer rains - the rain can be refreshing and all you might need to do is towel off a bit - whereas spring, fall, or winter rains can make you quite cold so that you'll want to protect yourself well. The other factor to take into account is your destination. If you are going some place casual you might not want to bring along a change of clothes. Going to work or a formal event may require you to bring along a clean, dry set of clothes and shoes.
Rain Gear Rain gear made for cycling usually has built in vents to allow air intake and cool you off. Many hardcore cyclists in Canada usually wear some sort of cycling jacket with arm pit vents (a common version is made by MEC). You will also find a hardy core of cyclists in places like Chinatown that use ponchos. I've been told this is the common gear in parts of Asia. You can buy specially-made bike ponchos from the Center for Appropriate Transportation in Eugene, Oregon. The bike poncho is shaped so you're legs won't get wrapped up in the cape and so that you can cover your handlebars. Quite innovative! It's hard to avoid splash back. If it's raining really hard, it's cold, and the roadway is gathering puddles, then put on a cheap pair of rain pants and some waterproof booties over your shoes. An alternative is to put your feet in plastic bags and then into your shoes. Then just bring along a dry pair of sandals or shoes. This also works well in the soggy winter. But in the warmer weather you can just put up with the splash-back, and bring along a change of clothes so you don't have to sit around in wet clothes.
Bike Equipment Fenders with mudflaps make a huge difference when they are on both front and rear. The spray from your own wheels makes you wet and dirty and is worse than what you get from cars. If you can afford waterproof bags or panniers, great! Again, MEC has a good selection. But you can also investigate a really cheap waterproof "bucket pannier", as exhibited by one of your intrepid bloggers on I Bike T.O.
Attitude and Techniques Worrying about the rain is half the problem, at least in warm weather. The weather report will say something like 30% chance of rain, and really that rain could fall at any time of day, in another part of the city. Even, if it does rain on you, you get wet, then towel off, depending on your ability to change clothes. To avoid spray from other vehicles, first discourage them from passing you too closely (take the lane rather than ride over at the gutter), and be cautious when you see huge puddles beside you; a car's wheel may go through it and create a huge splash. Avoid, as well, going through big puddles because you will have no idea what is hidden by the water: a pothole, a rock, crocodile and so on. If this seams like a lot of preparation, just think of all the gear you'd have to bring along just to go to the gym! Commuter cycling is just a way of integrating your exercise with your commute.