Type Wrap (updated for CS4)
1. Type wrap works kind of like the AREA TYPE tool. First of all, lets say you have a paragraph of text like you see here.
2. Then make a circle on top of it, or any other shape, path or image.
3. Then go to OBJECT > TEXT WRAP > MAKE
4. Viola! Easy as ABC. You can move it around to change the rags of the text.
5. Now you can offset the wrapping distance from your image, shape or path using the options.
6. Dialog box should appear where you can change the offset setting.
7. Again, easy as ABC.