I think a good villain is someone who is a good foil for your protagonist, has a good reason for being evil, and is just as round a character as your protagonist.
the "bad guy" i'm working on now, is a regular guy that just starts screwing with people's heads and it builds up to him being the bad guy. the first half of the story you see that he's got a wife that treats him like crap and he's kind of worn down to the point where he does questionable things.
That's an excellent way to put it -- they start good and they turn bad.
Lawful Evil is a great way to go, too.
My current villains, as it were:
* A guy who was sent on a mission by the leader of his group, only to return three years later and find out that while he was still in favor with the leader, his mission ceased to be necessary and the leader found someone new to depend on. So he takes his revenge.
* A wife who henpecks her husband so much that he drives the metaphorical knife into his own heart by leaving his family, agreeing to give her full custody, and then, 10-15 years later (haven't decided), his daughter by that woman comes to him begging for him to sue for custody because she's making the kid's life miserable too.
* A sorcerer who's made himself so that he can't age, working for an alien power against a planet not technologically as advanced as the alien power (not by a long shot). They're not backward... it's more like comparing Steampunk with Star Trek, although steampunk is not part of the story. Anyway, he's the bad guy, but I've included enough about him, through his own scenes and his daughter's scenes, that he is a round character.
Another way to go is completely and utterly flat, but to make the villain a minor character. One example is a story I wrote in which the bad guy is just a friend of a friend who does something that makes the rest of the main characters into bad people, not of their own accord, even though they're all technically protagonists.
And finally, you could just turn one of your good guys into the bad guy, as bekemeyer said, but make it such a gradual transition that even the protagonist doesn't know s/he is the bad guy until it's too late.