Card Sorting: Designing Usable Categories
Images have been uploaded to flickr from Donna Spencer’s upcoming book “Card Sorting: Designing Usable Categories”:

There is also a very interesting article on Boxes and Arrows, Card sorting – a definitive guide with a much needed explanation of what card sorting is:
“Card sorting is a quick, inexpensive, and reliable method, which serves as input into your information design process. Card sorting generates an overall structure for your information, as well as suggestions for navigation, menus, and possible taxonomies.”
Of course there are alternative methods, such as affinity diagramming.