You must have the following software installed and ready to use:
The following steps were tested with the following combination of tools: Java 1.6 Update 15, Eclipse 3.6 SR 1, Subclipse 1.6.2, M2Eclipse 0.12.0.
The main MATSim project includes the API and core implementation of MATSim. It includes everything to start with the basic functionality offered by MATSim and is required in any case.
https://matsim.svn.sourceforge.net/svnroot/matsim". If it does not yet exist, create it.matsim/trunk" and click "next".

The project will be checked out, which may take some minutes. The status of the checkout can be observed in the Progress-View of Eclipse.
After the project appears in Eclipse:
This will convert your project into a Maven/Java project. The first time, Maven may download some required dependencies which can take some minutes. Progress can be observed in the Maven Console View. After that, the project is ready to use.
The "Contributions" provide stable extensions provided by different developers. Some specialized features are not available in the main MATSim project, but must be loaded separately from the contributions.
To check out the contributions, proceed as for the main MATSim project, but this time select the folder "contrib/trunk".

Choose again "Check out as a project in the workspace" and name it "contrib".
After the checkout has finished, right-click on the project and choose "Maven > Enable Dependency Management". After this, materialize the contributions into own projects, i.e. each contribution should become a separate project in Eclipse (at the time of this writing, there is only one contribution named "sna"). To do this, follow these hints.
The "Playgrounds" provide a place for experimental, often unstable code, for each developer. You should only add the Playgrounds to Eclipse if you plan to develop code for MATSim yourself.
Proceed as for the main MATSim project (or for the contributions), but this time select the folder "playgrounds/trunk" to check out and name the project "playgrounds". After the checkout, enable the Maven Dependency Management and materialize the different playgrounds into separate projects. At the time of this writing, there are about 40 playgrounds, so you should see like 40 additional projects in eclipse.
As each contribution and each playground is a separate project in Eclipse, you may end up with quite a large number of projects in Eclipse you likely will not use much (e.g. the playgrounds of other people). While you could remove those projects, it may be better to just close them if you do not need them. Also, to gain some better overview, you can e.g. create a Working set that contains all the playgrounds.
To do this, select menu "File > New > Other ... > Java > Java Working Set".
Name it "matsim-playgrounds", and all the playground projects to it.
After that, in the Package Explorer, click the little triangle in the upper right and select "Top Level Elements > Working Sets".
Now you can easily hide all the many projects so they do not clutter your view.
In the end, you should have the following projects in Eclipse:
matsimcontrib (only if you checked out the contributions)playgrounds (only if you checked out the playgrounds)To use the OTFVis visualizer, one has to configure the path to the native libraries. To do so, go the the Java Build Path settings of the main MATSim project and set the "Native library location" within the Maven Dependencies to the correct directory according to your operating systems. The native libraries are located in libs/jogl-1.1.1/<system-dependent>/lib.

If you get a warning about Eclipse and JDK, you need to configure Eclipse to use a JDK.
Since Eclipse 3.5 it may happen that the code does not compile, even if everything is correctly set up, with the following error message:
Access restriction: The type <<some class name>> is not accessible due to restriction on required library <<some jar file on your system>>
In that case, go to Project Properties, Java Build Path, Libraries. Make sure that the Java version you use is not set to an "Execution environment", but to an "Alternate JRE". After that, the project should compile. It looks like the Eclipse compiler is overly strict when set to an execution environment, forbidding the access to classes that may not be available on all Java installations, but actually are on all major distributions. [Source]
