Changing a color photo into a black and white photo (or giving it a sepia tone) is as easy as clicking on a button in iPhoto. Select the photo you want to convert, then click on the Edit button in the toolbar. This will open up the photo in edit mode. To convert it into a black and white photo or give it a sepia tone, click on the appropriate button at the bottom of the Edit toolbar.
The new version of iPhoto (the one that ships with iPhoto 06) has additional effects you can add to your photos. You can give your photo an edge burn effect, or turn it into a vignette.
The new effects as well as the old black and white and sepia effects are accessible by clicking the Effects button on the Edit toolbar.
If you want to return your image to its original state after you have applied an effect, click on the Original thumbnail in the center of the Effects panel. In the older version of iPhoto, you can return an image to its original state by selecting Edit, Undo, or Photos, Revert to Original (which will return the photo to the state it was in the last time it was saved).