ok, so i finaly had time to create a liquids tutorial, which i think quite a few of you were asking for.  the tutorial is picture based and designed for somebody who is fairly new at blender, all that is required is a basic knowledge of the interface.  i will have an advanced liquids tutorial in about a month or two.  the tutorial is made in the new beta of blender so that when the alpha comes out this tutorial will still be valid.  however the process is exactly the same in the old versions except that the old versions do not include a frensel shader.

before starting the liquids tutorial it is important that you set the length of the animation to under 100 otherwise the time it will take to bake will be too high.  i recomend using yafray rather then blender's internal

Add a cube to the screen and make sure that it is similar in proportions to the one seen heer

add a sphere to the scene and scale it to the size and place seen below

Add a cube to the scene and scale it and move it to the location seen above. 

Below is  an example of how everything should look.

now you set the sphere as the fluid.  note that the objects which are set to fluids do not become the fluids, rather the domain becomes a fluid.  the objects set to fluids rather define where the domain is to add a fluid.  the color of the object set to fluid will not effect the final fluid.  currently there is no way to mix two different colored fluids.

Set the cube on the bottom as a fluid, do not change any other settings

Set the largest cube as a domain.  the domain is the most important object in a fluid simulation because it becomes the fluid.  the domain also defines the constrictions of the simulation.  the domain can be any shape and will act like a boundry.  the color that you assign the domain will be the color of the fluid.
TABS in fluids

    resolution-  defines the density of the mesh for the fluid. the fluid in reality does not act like a
                         mesh but acts like a grid and when the fluid touches a point on the grid that point
                        on the grid becomes visible.  the resolution defines the unit size of the grid.  the    
                        higher the resolution, the smaller the units of the grid and thus the more points on
                        the grid. i recomend a resolution of 80 as it is both quick and detailed

     End time- what part of simulation the last frame of the animation will end on.  a number of 0
                        stands for the animation not having yet begun. a number of 1 stands for the            
                        animation having finished and being completely still at the end.  you should never
                        set the level   to 1 because the rate of change is to high and it will take to long to    
                        animate.  at a level of .8 the animation should be visible finished moving.  its not
                        important to finish to a stationary point

Advanced Tabs

    Real world size-  the size of the liquid that the object is simulating in meters. 1 would be one
                        meter. if you are simulating the liquid ina  cup for example the size of the liquid    
                        would be about 2-3 inches and thus the size of the liquid be about .05.  if you are
                        simulating an ocean the size could be anywhere from 4-500.  if you are looking at 
                        if from a distance it is not important that the ocean would have a large size            
                        because it would act like a small size.

    Gravity- the place that the gravity is pulling to. unless your simulating liquid in space, use a    
                        number of -120 Z

When the settings of the liquid are satasfactory, click bake and continue. this will initiate the simulation

When the simulation is finished, select both the fluids (not the domain) and click M on your keyboard. move them both to a different layer otherwise you will not be able to see the actual liquid

Attached Link: liquids

Nice to see they've added some more options and changed some of the limits (the max. real world size is now 10m instead of 1m).

I don't quite understand why your suggesting a gravity value of -120, that's more than 12 times the default (which is set at normal earth gravity).

If things aren't happening fast enough, changing the number of frames and/or the end time would be a much better idea.

i have tested many values and a value of 120 acts the most realistic. it might be a bug, but thats how it works.  changing the end frame value can cause odd things to happen such as the first 3 frames holding the hole animation.  the settings i have provided act the most realistic.

Quote - I have tested many values and a value of 120 acts the most realistic.
It might be a bug, but thats how it works.
Changing the end frame value can cause odd things to happen such as the first 3 frames holding the hole animation.

Not in my experience, but as the default end time (of 0.3s) isn't consistant with 250 frames (10s at 25fps or 8.3333s at 30fps),  10x the gravity might make things appear better.
Once everything is set consistantly, and the resolution gets wound up, the simulation is excellent in it's reproduction of newtonian fluids.

true i am not arguing that if you set everything consistently it will not be more realistic, just that these settings provide an easy realistic solution.  the problem with setting everything realisticly is that you have to take realworld size into acount.  the settings i have provided conduct a realistic simulation for the art hobbiest which is fairly consistent throught the realworld sizes i have tried and other settings i have tried.  however if you are a physics major, i would not recomend my tutorial for the settings, just for setting up the simulation. a physics major might want to calculate the settings himself

Thanks!  I hadn't tried out fluids yet, this looks like a good place to start