All persons -- including U.S. citizens -- traveling by air between the United States and Canada, Mexico, Central and South America, the Caribbean, and Bermuda will be required to present a valid passport.
What's more, as early as January 1, 2008, all persons - including U.S. citizens - traveling between the these same countries by land or sea (including ferries), may be required to present a valid passport or other documents as determined by the Department of Homeland Security.
According to the U.S. Department of State website (http://travel.state.gov/travel/cbpmc/cbpmc_2223.html) , the Intelligence Reform and Terrorism Prevention Act of 2004's goal "is to strengthen border security and facilitate entry into the United States for U.S. citizens and legitimate foreign visitors by providing standardized, secure and reliable documentation which will allow the Department of Homeland Security to quickly, reliably and accurately identify a traveler."
So, if you're planning to fly into any adjacent country such as Canada or Mexico, you must now have a passport. If you're planning a cruise to the Caribbean or Bermuda, you'd better be prepared because by this time next year, you're going to need a passport.