Dig it out: This is how I've always done it. Get a sharp spade or a sharp shovel (dull tools=hell), cut out the shape of the bed (the fun part) and then dig it out. You may want to cut the sod into strips so that it comes up easier. Make sure the ground is nice and moist when you do this (if it's summer, soak it first) and make sure you get all the roots up. Early spring is a great time of year to do this. Have your teenage kid haul it away when your done or start a compost pile with it.
Till it: I would only recommend this if you're doing a large area. Also, don't bother with those little rinky dink tillers-they just aren't heavy enough to do the job-your shovel works better than they do. Again, water the area before your till it-esp if you have compact clay soil. Till until all the grass roots are destroyed. Rake as you go to remove clumps.
Smother the crap out of it: This seems popular with do-it-your-selfers, however most landscapers would not recommend this method-why? It takes too long. You're going to have to plan for next year's beds. Start in the summer by laying down cardboard or newspaper over the area of lawn you want out and then shovel some mulch, compost, grass clippings over the newpapers. Water it and keep it there for several months until the grass has died and the cardboard turns to mulch. I generally don't recommend this method because it's unsightly and not professional, but it does work if done right. Also, by smothering, you can kill not only grass but beneficial microbes in the soil. However, if you have a bad back, go for it.
Poison! Most lawn killers will do the trick quickly and effectively without turning your yard into a toxic waste dump. (Use boiling water or a vinegar/water solution if you want to stay away from harsher chemicals.) Follow the directions on the container, spray, wait a few days-dead lawn. Once the grass is dead and the herbicide has dried it's pretty much rendered harmless. You will need to still dig out the dead grass or till it, but it'll make your job easier once the grass is dead. Again, bad back people like this method. Hippies will roll their eyes in despair.
Whatever method you chose, do a thorough job. There's nothing worse than having grass coming up in four different areas of your new bed. Add lots of new compost to the newly dug area. Turn over the old soil of it's compacted with the new soil. Line your new bed with a plastic barrier if you wish, if not, that's fine. You're going to have to weed at some point anyway...there's no escaping that.