It requires a motherboard with two PCI Express slots and two compatible SLI enabled video cards.
I have an ASUS A8N-SLI Deluxe ($200 Motherboard) motherboard with two nVidia 6600GT OCs in SLI mode.
SLI is basically, as you already figured out, two video cards running together as one. The performance increase used to only be about 40%, but new drivers have pushed it to about an 80% increase. Not only that, it also increases the longetivity of the video cards and reduces the heat at which they run.
I've overclocked my 6600s to be about 6800GTs now, if not beyond the default 6800GT config, so that coupled with my AMD I'm running a good setup.
For $600, though, you can get two 6600GT OCs and the motherboard and outperform a single 7800 for the same cost, but also have a very good motherboard that's more expandable.
For right now both video cards have to be the exact same model, so only two 7800GTs could go together, but nVidia is working on ways to couple, say, a 7800GT with a 6600GT, and when they finally release that I'm going to get a 7800GT and run it in SLI with my 6600GT and probably sell one of my 6600GTs.
To tell if a card is SLI compatible or not (the 6600 is, I think, the lowest SLI compatible card) look on the top and look for what looks like a PCI board but only thinner, about an inch. Two cards like this are connected via a bridge that goes between them. I'll take pictures of mine later.
I'm assuming your board is a PCI Express, no? I'm not even aware nVidia is making the higher 7 series in AGP.
This is an eVGA 6600GT here, for PCI Express. It's actually only priced at $150 from TigerDirect, I guess 6600s dropped again (Mine were $250 a piece when I got them, but the 7200s were the best cards then)
http://www.tigerdirect.com/images/Sk...145-5122-c.JPG
Look just above it at the connector above the fan, on the top of the board. That's the SLI connector, and it's what the SLI bridge connects to when you have two cards set up for SLI.