On Mac OS X, I'm getting "avrdude: Expected signature for ATMEGA168 is 1E 95 14
Double check chip, or use -F to override this check."
I had to modify my avrdude.conf. Which should live in "/Applications/Arduino.app/Contents/Resources/Java/hardware/tools/avr/etc"
I uncommented the following line in the ATmega168 sections of the avrdude.conf file.
signature = 0x1e 0x94 0x06;
and commented out
#signature = 0x1e 0x95 0x14;