Depends what you want to do...
Target disk mode (as described by justperry) is perfect for occasionally, and very quickly, transferring a lot of files (e.g. copying all your files to a new machine) or a few huge files (e.g. humungous video files).
...but its not so good for day-to-day use, because you have to reboot one of the computers every time, and it can't be used for anything else while it is in 'target disc mode'.
If you're transferring files regularly then it would be better to use network file sharing - it will be slower (especially over WiFi - for faster results use an Ethernet cable) but far more convenient.