In Mountain Lion, we can now reorganize the categories in Finder's sidebar (instead of being stuck with what Apple thinks is the proper order). Want Devices above Favorites? No problem. You don't even have to hold down a modifier key—just pick up one of the category labels and drag it where you want it to go.
Continue dragging and organizing to your heart's content, and your sidebar will be fully customized. Keep in mind, too, that if you want to hide and show different things in the sidebar, you can control that under Finder > Preferences > Sidebar.
Or you can hold down Command and drag individual items right out of there if you prefer.
Get rid of everything under a category using the two methods above, and the category itself will disappear.
I have to warn you, though—if you remove everything from the sidebar, your Finder windows will look awfully bleak. Aw, sad-looking little window!