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# Why rewrite URLs? Read this: http://en.wikipedia.org/wiki/Rewrite_engine

# Apache (.htaccess or httpd.conf)
# Make sure AllowOverride is on for the directory, or put the rewrite rules in httpd.conf
# http://httpd.apache.org/docs/2.0/mod/core.html#allowoverride
RewriteEngine On
RewriteCond %{REQUEST_FILENAME} !-f
RewriteRule . /index.php [L] 

# Nginx (nginx.conf)
try_files $uri /index.php;

# More reading:
 - http://httpd.apache.org/docs/2.0/mod/mod_rewrite.html
 - http://wiki.nginx.org/HttpRewriteModule
 - http://wiki.nginx.org/Pitfalls

Note: Thanks to James (http://github.com/jamesvl) for his improvements and fixes (http://gist.github.com/910325)