I just noticed this by accident. In Address Book, you can drag a group from the left-hand Group list into another group. I had a Friends group and a Family group, but now I have a 'F&F' group containing both. Typing F&F into Mail sends and email to everyone in both groups. You seem to be able to add sub-groups to any depth, and you must double-click the sub-group in the Name column to expand it (which will select it in the Group column, basically). Pity it doesn't use the scrolling column view from Finder.
If you have the same contact in more than one group added to a super-group, that contact only appears once when mailing.
[robg adds: The screenshot at left shows how this looks (using fictitious groups on my machine). This feature is covered in Address Book's help, but you have to know exactly where to look. I finally found it in Browse Address Book Help -> Setting up Address Book -> Creating a Group of Contacts, where it merits exactly one line!
This is one of my main irks about OS X. I really believe that the help files should also be repackaged as true user guides available in the Help menu (much like Pages and Keynote now have). Using Help to simply find all the features of these programs is irritating at best -- help isn't meant to be browsed, it's really more of a "solve my problem" device. A user guide with "previous" and "next" and a real index would be so welcomed!]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20050206060906401