I've seen this a lot when working with both modellers and riggers and I hope this post will help overcome the problem of 'sausage fingers'. The problem is joint between the modelling and rigging process (see post 2 if you want to read further comments on why it is a useful combination) I've decided to show this in pictures as it is apparently worth a thousand words and I don't have time to write an essay :)
Although it might appear to the modeller rotating points that this model of a hand might work fine... The sub division will bend straight over the vertices, smoothing it much more than is desireable.
Let's start with looking at the flow. Exactly 3 edgeloops is required for each joint. No more, no less. Once their vertices are correctly in place, they will make up a perfectly bendable joint with good definition. If you use two, and you're clever, you can get very good definition too, but it might be difficult to get the bump in with this amount of detail. Five or more is very superfluous while four is acceptable (although only if each line contributes greatly to definition like modelling the full inset in great detail, in which case five might be acceptable too). Remember that extra wrinkles can be done in Zbrush or some other displacement/bump map program. Move the vertices slighly apart at the bottom of the finger, so that when it starts collapsing, they will have further to go befor they overlap, this goes for ALL single rotation joints with subdivision regardless of number of edgeloops (knees, elbows etc should all be done the same way).
Another problem I often see on the modelling part is that the thumb has been modelled the same as the other fingers, and as an extrusion from where we see the thumb separate from the hand. This is not correct and will always bend wrong. The thumb bone has a pillow (as does the other fingers but their ones are more linked) and the polyflow should always reflect that.
As I was saying about the thumb starting within the hand, so does the other fingers. We have bones running up to them, which allows us to do things like cup our hands, and secondly, the first joint of the actual finger is INSIDE the palm, not at the edge where the finger separates from the others visually. This is an extremely common mistake and well worth noting.
The final 'trick' I will devulge is using 'T-bones', bones going across the joint of the finger, to hold the fleshy parts in place, and maintain volume. When you bend your finger it collapses only at the joints while the fleshy parts even expand a bit (you could add an expression to get this if you're a bit anal about it :) ) Remember leaving the vertices at the bottom slightly further apart than at the top? Now the T bones will help grab a hold of these more than they do at the top and therefore hold them tightly in place while the top still bends around the axis as it should
Thanks a lot for reading. Hope it helped someone with their wonky fingers.