In Exchange 2003 and 2007 this feature is built in and enabled by default.
The phone connects to the server over the air using the internet data connection that all iPhones have. The Exchange server needs to be accessible via HTTPS (port 443) and it needs to have an SSL certificate on it that the iPhone can use. Usually this means purchasing a certificate from a 3rd party, but there are ways to get around this if you choose to create an SSL certificate manually through Certificate Services on Windows Server.
I would check out these Apple documents for more specifics on the steps:
http://images.apple.com/iphone/enterprise/docs/iPhone_MS_Exchange.pdfhttp://manuals.info.apple.com/en_US/Enterprise_Deployment_Guide.pdf