Here is another window downstairs with some lovely custom sealing:

Wood windows are notorious for leaking air as they are designed primarily with aesthetics in mind and not efficiency. That doesn't mean there aren't steps you can take to improve the airtightness of your windows without resorting to the unsightly measures that the past owner chose. Open the bottom sash of the window and see if there is some weatherstripping on the underside of the sash where it meets the sill. There should be some type of gasket weatherstripping there. If there isn't, this is the place to install it.

+1 to Ultrawindows feedback.

See if the lower sash weatherstripping is intact or serviceable and replaceable.

There are usually some more surgical ways to fix some of these issues but homeowner tend to go the HD and Lowes routes of repair and wind up with what you have there.

Good advice above, although for 14 yr old builder grade wood windows, you might be trying to put a bandaid on a gaping wound at this point. The previous owner probably realized that so they just tried what ever they could to stop the drafts in a cost effective manner until it they could replace them or sell the place. You'll see improvement to be sure by replacing weatherstripping etc, but you are unlikely to be satisfied until you replace them.

Agree. You will need to make an investment in new windows, there is just no other way around it. Covering your windows in thick plastic would look kind of ridiculous.
I always recommend higher end vinyl window brands, those are the most durable and certainly the most energy efficient by far.

Thanks for the tips everyone, I kind of feel like I have been kicked in the gut at the thought of replacing all those windows. It's a large house 3700+ sqft, with a lot of windows, so to say I am freaked out a little is an undertatement. New windows? Ish!! What, that is easily 20,000 and up, right (I know, depending on what kind, size, etc.)? Whew!

The previous owner may have been taking the path of least resistance by applying the "over the counter" weather stripping like she did on these windows rather than go the more expensive route of replacing the actual window weather stripping. See if you can find out the name of the manufacturer and if it is a major brand, you just to replace the weatherstripping and maybe some other minor parts rather than go to the expense of new windows. If it is an off brand, you may be out of luck. Check with the original owner or builder if possible. Twelve years isn't that long ago.

Take some pictures of the weatherstripping.

All the components of the window are sourced from other manufacturers when it comes to weatherstripping, latches, and other items on the window so you should have no problem finding a suitable replacement for the weatherstripping without going through the company that made the windows.

Replacing the windows is pretty extreme. Like mentioned you might need the proper weatherstrip or make a modification to that stool. I'd search for a contractor who has good window repair experience or a window dealer/distributor who offers service.

Okay, thank you all for all of the tips. I'm not sure what brand the windows are, the window latch says, "builder's"-don't know if that's just the brand of lock or also goes for the windows. I will be looking into fixing the weatherstripingfor now. Thank you!