If you have a new ATmega328 (or ATmega168), you'll need to burn the bootloader onto it. You can do this using an Arduino board as an in-system program (ISP). If the microcontroller already has the bootloader on it (e.g. because you took it out of an Arduino board or ordered an already-bootloaded ATmega), you can skip this section.
To burn the bootloader, follow these steps:
You should only need to burn the bootloader once. After you've done so, you can remove the jumper wires connected to pins 10, 11, 12, and 13 of the Arduino board."
"Once your ATmega328p has the Arduino bootloader on it, you can upload programs to it using the USB-to-serial convertor (FTDI chip) on an Arduino board. To do, you remove the microcontroller from the Arduino board so the FTDI chip can talk to the microcontroller on the breadboard instead. The diagram at right shows how to connect the RX and TX lines from the Arduino board to the ATmega on the breadboard. To program the microcontroller, select "Arduino Duemilanove or Nano w/ ATmega328" from the the Tools > Board menu (or "ATmega328 on a breadboard (8 MHz internal clock)" if you're using the minimal configuration described below). Then upload as usual."
NOTE: In addition to following all the steps from the arduino website posted above, you will need to connect the reset pin of the arduino board to the reset pin of the atmega chip in order to upload code.