If you're a U.S. or Canadian citizen, you need a passport to fly from a U.S. airport into Canada or a Canadian airport into the U.S. At the moment, because so many people are trying to get passports and they're backlogged, if you're an American and can prove that you have already applied for a passport, and have other ID, you're okay.
If you're a U.S. or Canadian citizen, you don't need a passport to drive across the Canadian/US border, but the deadline for that is January 2008... they keep changing the date but it's coming.