Do this in three steps: break the polygons into their component parts, count the overlaps, and convert to raster. This avoids the potentially huge computational cost of separately converting every polygon to a raster and combining those rasters.
Union (in the Geoprocessing menu) breaks the polygons into their parts.
Unfortunately, each overlap is duplicated in the output: it has one identical copy for each original polygon covering it. Therefore
Dissolve (again in the Geoprocessing menu) will merge overlapping parts, provided you can find a way to uniquely identify them. Read through the dialog: towards the end, you will have an option to compute "statistics." Choose any field that may have identified the original polygons and ask for a count.
In many cases the combination of polygon area and perimeter will uniquely identify the parts. If not, you can add more geometric properties in additional fields, such as coordinates of the centroid, until you have accumulated enough information to distinguish every feature.
The resulting layer has one feature for each polygon overlap and some kind of "count" field counting the number of overlaps.
Convert that to a raster, using the "count" field for the attributes.
For example, here are some overlapping polygons and their identifiers with the attribute table shown:

After the second step we have one record for each overlapping region along with a count which can already be used to symbolize the amount of overlap:

The rest is easy--and it's just a single rasterization operation.
Unionis that with almost the same workflow it can address the situation where the polygons reside in multiple datasets (which is usually a bad database design but unfortunately common): one simply unions all the input datasets at once. – whuber Feb 14 '13 at 23:13union) followed by rasterization? Vector operations will bog down when the features are digitized with more detail than needed, endowing them with too many vertices. In these extreme circumstances the raster approach could be better (although first simplifying the polygons might be a superior option). In all other situations, though, rasterizing each polygon separately is a huge waste of computer and human time. – whuber Feb 14 '13 at 23:18