UPDATE 01-15-11

The Python script no longer works with the newer version of Kindle for PC. The following site provides an updated method on removing the DRM.
http://roke-isle.blogspot.com/2010/05/unskindle-step-by-step-guide.html

Remove Kindle Book DRM

This Kindle hack relies on a few Python scripts to remove the DRM from books already purchase via the Kindle Store. The scripts, of course, require Python to be installed; the hack also uses the Kindle for PC application so you'll need to run this on a Windows machine.

1. Download and install the Kindle for PC application: http://amazon.com/kindleforpc
2. Sign in with an existing Amazon.com account, or create a new one. NOTE: the hack is decrypting books *already* purchased, so you need to have actually bought a book in order for this to work.
3. Download and install the Python scripting language: http://www.python.org/ftp/python/2.6.4/python-2.6.4.msi
4. Download the Unswindle Python script here: http://pastie.org/755693
5. Download the supporting Python script (mobidedrm.py) that Unswindle relies on: http://pastebin.com/m12cec25b
6. Open the unswindle.py script (you may need to browse to the python.exe executable).
7. After a while the Kindle for PC application should launch
8. Click "Archived Items" and open up a Kindle Book
9. Close out of the Kindle for PC Application
10. You should be prompted for an output location, choose an appropriate place.

Original Guide

I <3 Cabbage's blog post
http://i-u2665-cabbages.blogspot.com/2009/12/circumventing-kindle-for-pc-drm.html