Smarty is what I like to use. Has lots of features and is in implemented as a Object. But it requires certain configuration settings. (smarty.php.net)
Pear's template is also used alot.
But then again people write their own engines for specific needs, like simplicity, speed, etc... factors.
So be aware that all template engines are not made for the same purpose. Find what your needs are and then look for the template engine that suits those needs. The two mention above are some of the most popular.
