I'm thinking about renting my current house after moving into a new one in a few months. I'm wondering if I do decide to try renting it and then later (a year to a couple of years) decide to sell it do I get taxed on the sale of it at that time assuming I do not buy another property. How does this work?

In general, you are taxed on the capital gain when you sell the house. If the house is your primary residence for at least 2 of the previous 5 years you can exclude up to $250K of the gain from taxes. So if you sell this house within 3 years of moving out, you shouldn't owe CG taxes on the gain. If you wait more than 3 years, you will owe CG taxes (assuming you have a gain). Also, if in the years that you rent out the house you depreciate it, then when you sell the house your purchase basis is reduced by the amount of depreciation you have taken. You can find more detailed information here:
Publication 523 (2006), Selling Your Home

ebaines - thanks for the feedback. The current value of our house is estimated at $110k to $120K. Soiunds like we have nothing to worry about since its under the $250K mark. Is that correct? I'll read through that link also...

ebaines - thanks for the feedback. The current value of our house is estimated at $110k to $120K. Sounds like we have nothing to worry about since its under the $250K mark. Is that correct? I'll read through that link also...