It is not necessary as the US has a reciprocal agreement with Canada. However it is a good idea to have a passport in this day and age as others have stated.
I last visited Canada Thanksgiving holiday of 2001. Getting into the country was no problem being an American citizen.
Getting back in was another matter. While I did bring my driver's license and birth certificate, I beleive my car would not have been searched had I possessed a valid passport.
As it is I won't be doing any more traveling outside the US until I renew my passport.