Todbot has posted an excellent tutorial on how to setup and use the minimal Arduino, which is the bare minimum you need to run a ATmega chip and the Arduino bootloader.
Todd goes into detail about how to get the bootloader onto the chip as well as how to setup the Arduino environment to use it.
Even if your not interested in building an Arduino from scratch, It’s a good read if you are interested in the technical aspects of what makes the Arduino work.
http://todbot.com/blog/2009/05/26/minimal-arduino-with-atmega8/