For prototyping, its either gomockingbird, balsamiq or some quick HTML (plus the odd photoshoping) to simulate interaction.
In fact, I design entirely with HTML/CSS (using the Live CSS Editor feature of the Web Developer add-on for FireFox) and use Illustrator to mix and pick colors.
These days I tend to do more of a mix, I like the expressive freedom of photoshop and the rigid grid structures and typography of HTML.
But I almost always start in photoshop after mocking. Probably from habit.
With things like this and CSSHat, I fear that people will use these tools not to learn from, but to immediately sell themselves as devs and further worsen the state of an industry that's already lost its passion for the combination of art and experience by cutting all corners possible.
I actually started doing it this was because products like TypeKit don't supply the fonts to use in anything other than the the web browser.
I don't think it's the case any longer that to be a designer you have to be tied to a particular piece of software to produce your work.
Disclosure: I am not owner of moqups. Just an enthusiastic early adopter/evangelist ;)
Large web consulting forms expect the visual designer to work this way, to drop a PSD that they can then convert to a template for their CMS… But working in this way you’re relegated to a role of providing a visual look, not really designing the interaction of the site…
Also on a technoligical level it becomes harder tot exploit the possibilities of javascript etc. if you think in a static fashion. if you want more influence you either need to work in a more ping-pong fashion with a developer, or develop yourself.
In both cases I find myself rarely using Photoshop, preferring an iterative process, with sketches on paper and in HTML.