I actually have no experience with this at all. The C like source listing was what caught my eye and is the reason why I posted it. I am currently Googling/Ebaying around right now to buy some kits. If you have any recommendations, I'd appreciate it.
I recommend http://www.adafruit.com
I bought the usb boarduino kit for $25 which is the cheapest way to get into arduino if you already have a breadboard and a soldering iron. Great tutorials on the adafruit site too.
Arduinos are awesome. I've never done anything terribly code intensive, but a few months ago I built a water-sensor network for the wells around my parents' house. The sensors keep track of the water level in each of the wells, and sound an alarm when the water level rises above a certain point.
I did this with about a year of programming experience, and zero experience with hardware, and all for about $80. It helps that the Arduino language has a great IDE that takes care of compiling and uploading the code to the board.
http://www.arduino.cc is the main Arduino site. It has the IDE, documentation, examples, and links to websites that sell boards and accessories. Boards run about $35. Cheap and effective.
I'm looking to do something similar but for various locations in my parents' basement. What did you use for sensors and power? How about communication to the outside world?
It's actually fairly simple. I used the analog pins, and the sensors were just a circuit with a resistor that would be bypassed by the water. I used the 5V pin on the Duemilanove board to put power through the circuit, and then hard coded the numbers from the analog pins into the main loop.
I would have done a simple setup that allowed the water to close the circuit, but the sensors are very sensitive, and would react to my hand being near them when there was no circuit. I don't know enough about electronics to explain why...
As far as communication goes, I have a simple LED setup, with rows of 5 LEDs indicating the water level.
The easiest way I've found for communication outside is with the ethernet shield. I have some motion sensors that phone home to a central server via a network connection and it works very well. I used a wall wart for those.
I would suggest getting a starter kit from makers shed, it comes with a bunch of sensors resistors and cables to start hacking right away. You can also get a arduino prototyping shield that mount on top of arduino with a breadboard on it.