You may have noticed you can only choose people from the domain the server farm was installed in to. To add additional forests, you must register credentials with each forest you want to pick from. Like this:
stsadm.exe -o setproperty -url http://portal.contoso.msft -pn "peoplepicker-searchadforests" -pv "forest:contoso.msft;domain:toys.contoso.msft"
After you have registered credentials, you should now be able to pick users/groups from that forest.
-ben
--added---
If you want details on this command, check out Joel Oleson's blog here.
--updated 10-2007--
If you need to run the command for multiple forests, smush them all on one line, like:
stsadm.exe -o setproperty -url http://server.domain1.com:80 -pn peoplepicker-searchadforests -pv domain:domain1.xxx.com;domain:domain2.yyy.com;domain:domain3.zzz.com
You need to do this for every ZONE, even if you only have one Web Application. In addition, every WFE server must be able to see the domain controllers for each of these domains/forests. Good luck!
(Thanks, Rich!)