Incident Response is a set of procedures for an investigator to examine a computer security incident. This process involves figuring out what was happened and preserving information related to those events. Because of the fluid nature of computer investigations, incident response is more of an art than a science.
Incident response tools can be grouped into three categories. The first category is Individual Tools. These are programs designed to probe parts of the operating system and gather userful and/or volatile data. The SysInternals suite is frequently cited as a good example of incident response tools. They are self-contained, useful, discrete, and do not create a large footprint on the victim system.
Standalone tools have been combined to create Script Based Tools like FRED or the WFT. These tools combine a number of standalone tools that are run via a script or batch file. They require minimal interaction from the user and gather a fixed set of data. These tools are good in that they automate the incident response process and provide the examiner with a standard process to defend in court. They also do not require the first responder to necessarily be an expert with the individual tools. Their weakness, however, is that they can be inflexible. Once the order of the tools is set, it can be difficult to change. Some script based tools, such as Microsoft's COFEE allow the user to pick and choose which standalone tools will be used in a given examination.
The final category of tools are Agent Based Tools such as Mandiant's First Response. These tools require the examiner to install a program on the victim which can then report back to a central server. The upshot is that one examiner can install the program on multiple computers, gather data from all of them, and then view the results in the aggregate. Finding the victim or victims can be easier if they stand out from the crowd.
There are several books available that discuss incident response. For Windows, Windows Forensics and Incident Recovery by Harlan Carvey is an excellent introduction to possible scenarios and how to respond to them.