You will need an install disk with the system you want to restore. The best thing would be to get a copy of the original disks that came with your mac. Or you can use a retail version (in that case you should give the new owner those disks...)
Then you just start from the disk, holding down the C key at startup. Once it booted open Disk Utilities in the Tools menu and Erase the disk. You will have to set the erase Options before proceeding, to write zeroes on the whole disk. This will make sure Your data won't be recoverable from the disk. Depending on how sensitive it is you can do more than one pass (it will take a long time to finish, depending on the size of your drive).
Once you are done install the operating system from the same CD or DVD.