Not only will you need to "root" your phone, you will also need to install a custom Rom that supports Apps2SD (cyanogenMod or those that copied it).
Then you'll need to format your SD card with a partition for Apps2SD (max 512meg) and the rest a standard Fat32 partition for your music, pics, etc....
Rom Manager makes it very easy to get both CyanogenMod 5.0.7.1 Rom and partition your card for Apps2SD.
It works very well, I had no issues with it at all.
I am running the Release Candidate of Froyo (OS 2.2) now which has it's own "version" of Apps2Sd which is not anywhere near as nice as CyanogenMod's version. It uses your standard Fat32 formatted SD Card and requires the Devs to code their apps to support it. I've also found that the ones that are supported...if you move them to the SD Card, they disappear from your App Drawer and if you have shortcuts...you get a generic Android shortcut.
Apps2SD on CyanogenMod is transparent....you have the Rom, the partition and you put a check in your settings "Enable Apps2Sd" and it just works. I really liked his setup.