A good boss will set himself as a good example. His action is effective. He is human. The way he talks and performs his duties speak for him. He is not a preacher but a man of good actions. His action is a mirror of his personality.

I tend to agree with David and would definitely start there. However, some bosses can catapult to their position due to who they know rather then what they know.

From experience, if your boss is truly a inadequate, it will come to light sooner or later (see today's economy). When he or she does they'll most likely blame their employees or support group. Make sure you maintain evidence - emails, request, etc. - on how they failed you as well. It may just get you or your team to the next level.

You don't. The power differential is too great, and his bosses have already signaled to you that they're behind him by not firing him previously.

You've got no way to know if he's the one in a thousand who'll actually welcome the opportunity to improve until you've cut your throat.

Put up with it or quit.

You need to learn how to manage your boss. Everyone has a an achilles tendon and you have to try to see life from their perspective to understand where they are coming from. Then you have to think about the message you want to deliver to them (in a positive, abstract and inpersonal manner) and a strategy for delivery. You can't come across as if you are giving feedback, but rather commenting on something that needs improvement. Usually you will humble them because they get what you are saying, but you are not criticizing them directly.

Many operate out of fear that they will lose control or that they must be the smartest guy in the room. So the tactic I use is called "planting a seed". In a very casual way, make a comment about an initiative or interaction or issue that you think needs to be addressed. Give your perspective and ideas. Talk about what the impact is to the group @ large. Then step away and never mention it again. It will be amazing but your boss will come up with a similar idea in 1-3 months. Granted it will be his idea and not yours, but what the heck, you still accomplished what you wanted.

If your boss is passive aggressive the best way to deal with them is call them on it, but not in public. Ask them to coffee or request a 1x1 and just plainly say, "the other day, I sensed you were unhappy with me. If so I would really like us to be on the same page because I value our working relationship and respect you a lot. If you could give me some constructive feedback, I would really like to improve". Passive aggressive people can't handle being called out for their behavior and your boss will change toward you. But guess what, you took the high road so they won't want to have the interaction again.

If you have one of those bosses that runs hot & cold on you due to their inability to manage their own stress levels, then you need to get them when they are in a really good mood and talk about it nicely. I usually speak abstractly in terms of leadership philosophy. Here's a sample dialog I like to use for these types of people:

I think being a leader is a tremendous responsibility. They are like public figures and people are always reading into their body language, actions and tone of voice. It must be rough being a leader, but it is even rougher being a person who has been blown off or spoken to roughly by a boss. That poor person would probably lose sleep at night and worry that their job was in danger and their performance will begin to slip due to anxiety. But worse than that it becomes like a virus that spreads and word will get out and people will be afraid to take chances or make mistakes, and then the company will grind to a halt. Innovation and progress is built on mistakes so it is really important that we nurture the interactions and environment to encourage our employees to make mistakes. That is why I think a leader really has a rough job because they must never allow their stress to impact people personally and directly due to the long term ramifications it can have on an organization.

Now if your boss is just plain old abusive (this is rare) then you need to just tell them directly. I sense you don't want me here, is that true? Then outline to them the interaction. But again, defer to them, give them a chance to explain and make an agreement to get on the same page because you really like the boss and want to have a healthy relationship with them. Then look for a new job ;-)

I agree with the entry by Christine Vargas. Nothing good will come of this. Having my share of bad bosses in the past, I received negative impacts when I addressed it. The only option I found was planning my exit strategy. This could mean transferring within the company to leaving the company. I have done both options and both worked out well for me.

A 360 degree review is a powerful way to do it because then you're not the only one - odds are if he or she's a bad boss your comrades are feeling that pain too.

During an exit interview after putting in your papers

you tell them on the yearly employee satisfaction survey....they will get the message because their increases/bonus's are in percentage based on how the employees feel about

I will tell a bad boss story when I am with colleagues and the boss. I will lead the topic and let him know what the bad boss is, meanwhile I will give him a hint.

It is interesting that some comments here essentially forget ethics and leadership traits. Some are amazingly good advice. Others are too pragmatic - some so self-centered that they are embarrassing to read.

Where are your standards of basic responsibility - the ones that supersede mere butt-covering and office politics? Be a real leader - do not just stand in line and wait to be let out for recess. Find a way to address the problem without causing real damage to your career. In other words, use your head and your heart to manipulate the situation against the aggressor.
I have worked with plenty of people who embrace "duck and cover" habits for dealing with bad bosses, and they are the reason bad bosses rise to the top. Bad bosses walk all over all the selfish, gutless cowards in the company. Suckers.
Rather than leaving and believing a terrible boss out of sight is no longer your problem, create the possibility of change. Stop being babies and cowards. Start by losing your patience with your bad boss - or your bullying boss - in front of other subordinates. Unless you are in a company full of cowards, at least you will have witnesses who could acknowledge the boss' abuse should it come to that. Those who have been put upon now have someone willing to stand up to the boss to validate their feelings of being bullied. Just don't take it too far unless you are willing to lose your job.
If it is a case of an excitable and insecure boss who gets demeaning to subord's when the pressure is on, simply ask him if it is necessary to talk to you in a berating tone. If he cannot respond, then you have just won one battle. Bad bosses have disarming skills of fooling themselves (thus fooling others), I have found, so be aware that they are convincingly unaware of their stupidity.
Work it out in your own mind first, be adult about it (which is hard when your boss reminds of the oversized brat who flicked tater tots at you in high school). Be ready to address the issue with his or her boss, since one cannot count on HR to back you - they are typically on the side of managers (look up "Why we hate HR"). Be willing to move on, most of all.
There is enough abuse to go around, I do not think tolerating unreasonable bosses is a matter of business - it is a matter of promoting bad behavior. It is exactly what happens in an abusive relationship of any type - the victimized sustain the abuser's power by enabling them to be a bully. Stop supporting bad habits by default: This is the same concept that provides children with no sense of respect or work ethics. People tolerate bad behavior and it will thus not change.
If dysfunction is the rule of a company, that creepy feeling you get is telling you to find another job, and quick. Be prepared to realize, depending on your job, that, sadly, "quick" might be six months, a year, possibly more. That is a long time to put up with a moron and enabling his bad behavior, so don't enable it. Try to alter that path.
And, yes, move on. But you don't have to be a selfish coward about it.