Generally, a foreign citizen who wishes to enter the Kingdom of Thailand is required to obtain a visa from a Royal Thai Embassy or a Royal Thai Consulate-General. However, nationals of certain countries (like Australia, Canada, United Kingdom, Unites States of America) do not require a visa when entering Thailand for tourism purposes and will be permitted to stay in the Kingdom for a period of not exceeding 30 days on each visit (complete list of countries). Foreigners who enter the Kingdom under the Tourist Visa Exemption category may re-enter and stay in Thailand for a cumulative duration of stay of not exceeding 90 days within any 6-month period from the date of first entry. If you like to stay more than 30 days in Thailand, you are required to apply for a visa.

Foreigners entering Thailand are not permitted to work, regardless of their types of visa, unless they are granted a work permit. Those who intend to work in Thailand must hold the correct type of visa to be eligible to apply for a work permit - see - Information on Work Permit applications.

The new "visa run" rules
Be prepared, don't be caught out by the new visa rules. As of the 1st October 2006 new rules regarding the use of the 30 day visa exemption stamp came into force.
The new rules state that the 30 day stamp can only be used back to back for a maximum of 90 days, after which no more will be issued for another 90 days. This means anyone using the 30 day visa exemption , and therefore doing the visa run every 30 days, to stay long term in Thailand, now need to find another way to stay long term. It seems so far that a person can leave and enter as many times as they like within that 90 day period, but after 90 days of getting back to back entries using this method, people will be refused another 30 day visa exemption .
So, what to do ?
The rules only apply to those using the 30 day stamp to stay long term. Anyone who has a visa issued at an embassy or consulate outside of Thailand will not be affected. So the answer is clear, If you are staying or plan to stay in Thailand long term, or an extended time, you will need to apply for the appropriate visa in your home country before travelling. Tourist visas can easily be obtained in countries neighbouring Thailand, but the consulates seem to be only issuing the single entry type, but for those with no other choice it's a good option.

Foreigners who fall into any of the following categories are prohibited to enter Thailand:

(1) Having no genuine valid passport or document used in lieu of passport; or having a genuine valid passport or document used in lieu of passport without valid visa issuance by the Royal Thai Embassies, the Royal Thai Consulates-General or the Ministry of Foreign Affairs, with exception of those who meet visa exemption requirements.
(2) Having no appropriate means of living following entry into the Kingdom.
(3) Having entered the Kingdom to be employed as an unskilled or untrained labourer, or to work in violation of the Alien Work Permit Law.
(4) Being mentally unstable or having any of the diseases stated in the Ministerial Regulations.
(5) Having been imprisoned by judgment of the Thai Court; or by lawful injunction or judgment of the Court of a foreign country, except for when the penalty is for a petty offence, or negligence, or is provided for as an exception by the Ministerial Regulations.
(6) Having behaviour which could cause possible danger to the public; or having the likelihood of being a nuisance or constituting any violence to the peace, safety and security of the public or to the security of the nation; or being under warrant of arrest by competent officials of foreign governments.
(7) Reason to believe that entry into Kingdom is for the purpose of being involved in prostitution, the trafficking of women or children, drug smuggling, or other types of smuggling which are against public morality.
(8) Having no money or bond as prescribed by the Minister under Section 14 of the Immigration Act B.E. 2522 (1979).
(9) Being a person prohibited by the Minister under Section 16 of the Immigration Act B.E. 2522 (1979).
(10) Being deported by either the Government of Thailand or that of other foreign countries; or having been revoked the right of stay in the Kingdom or in foreign countries; or having been expelled from the Kingdom by competent officials at the expense of the Government of Thailand unless exemption is provided by the Minister on an individual basis.

More useful information: Thaivisa and Thaizine.