This is from the Canadian Passport website:
In April 2005, the United States Government announced the Western Hemisphere Travel Initiative (WHTI) requiring all visitors to and from the Americas, including Canadian citizens, to present a passport to enter or re-enter the United States by December 31, 2007.
The WHTI will be implemented in two phases, as follows:
December 31, 2006 - A passport will be required for all air and sea travel to or from Canada, Mexico, Central and South America, the Caribbean, and Bermuda.
December 31, 2007 - The passport requirement will be extended to all land border crossings as well as air and sea travel.
Here's the website if you would like to look at more FAQs:
http://www.pptc.gc.ca/help/faq.aspx?lang=e
Also on the website, if you apply in person, passports will be ready in 2 weeks. If you mail in your application, the turnaround is 4 weeks. You can get it couriered faster than 2 weeks at a cost. Also, interestingly, you can order a passport for a newborn without a birth certificate, but there is a special application route (see website for more info).