Cotton might be breathable all by itself, seems to be reasonably so, but it isn't too breathable as a layer.
Take last week. I am still quite a newbie, and I don't have a lot of materials/clothes.

I went out on what turned out an all day trek. After an hour of hiking up and building up a lot of sweat, I started cooling off (higher elevations are cooler). And I was actually a little cold and uncomfortable. If it had much colder I would have miserable (I doubt it would have killed me, and if worse came to worse I could always take off the under layers for I had a reasonably windproof jacket.

I have heard very good things about Coolmax. Actually got socks made of this, though not for hiking. CoolMax is used by the soldiers in Iraq and Afghanistan so it is really cool too. (As well as not getting you colder should you get sweaty.) It is also inexpensive, or reasonably so.

I suppose if you hike in desert flats where it stays hot, I have heard of hikers who prefer cotton.

--des