New U.S. Travel Document Requirements
As of January 23, 2007, new U.S. government regulations will require all adults and children to have a valid passport for all international travel by air.
Until January 2009, U.S. Citizens can travel by land or sea to Canada, Mexico & many countries in the Caribbean with only a birth certificate and driver's license. This regulation also applies to travel by sea to The Islands of the Bahamas.
UPDATE: The U.S. Departments of State and Homeland Security announced recently that U.S. citizens traveling to Canada, Mexico, the Caribbean, and Bermuda who have applied for but not yet received passports can nevertheless temporarily enter and depart from the United States by air with a government issued photo identification and Department of State official proof of application for a passport through September 30, 2007. The federal government is making this accommodation for air travel due to longer than expected processing times for passport applications in the face of record-breaking demand.
For more information view the pdf update from the U.S. Departments of State and Homeland Security.