In wordpress 3.0 and above there is a nice build in menu. To create a drop down menu using this menu system follow there articles:
http://new2wp.com/pro/jquery-drop-down-menu-wordpress-3-menu/
http://wphacks.com/top-5-wordpress-navigation-menu-tutorials/
This is the main code in the CSS to achive the result:
#menu-header ul ul {
display: none; /* For testing, change to display: block; */
list-style:none;
z-index:100;
}
#menu-header ul li:hover > ul {
display: block;
}