Depending on your development environment, there are various things you might have to do to enable clean URLs in Drupal -- this is how I did it using the Apache web server built in to Mac OS X 10.6:
- In /private/etc/apache2/users/[username].conf, change (with sudo) "AllowOverride None" to "AllowOverride All"
- In /Users/[username]/Sites/drupal/.htaccess, change "RewriteBase /" to "RewriteBase/drupal" (or, depending on your setup, "RewriteBase /~[username]/drupal")
- Restart apache: "sudo apachectl restart"
- Go to http://localhost/drupal/admin/config/search/clean-urls and check "Enable clean URLs"