Wipe Android phone before selling

The first thing you'd want to do is simply remove the SD card if any in use. If you intend on providing an SD card, purchase a new SD Card.

As suggested, the first step would be to encrypt your data (you can read up on this here), then perform a factory reset of the phone - I'd suggest performing this approximately 3 times. (1 should be sufficient, but 3 will determinately just make it a little harder to recover the data). You can find a pretty neat guide/explanation on this website.

Just to add onto Jay's answer, here is a basic guide on using ADB to encrypt your device. Note that the commands are noted to be:

user@laptop # adb root

user@laptop # adb shell

root@phone:/ #

root@phone:/ # /system/bin/vdc cryptfs enablecrypto inplace PASSWORD

If you have rooted your phone (and intend to sell as is) you can install other applications that can encrypt certain directories, but I doubt you'll want to do this.