Mercurial with bitbucket is great. Bitbucket offers one private repository (I think this is a new thing, but I'm not sure) for free, so it seems fine for use with closed-source code, if you need that.

We also used mercurial for a while in conjunction with dropbox (just set up our central repository in dropbox). Mercurial is a lot less overbearing than SVN (very easy to setup repositories), so I recommend it highly for a small team. Git is also a great option, but I haven't used it myself (and it doesn't seem like github offers free repositories yet unless you are an open source project).