Labiaplasty is the primary surgical component of male-to-female sex reassignment surgery, however it is somewhat different than described in SheThing's above writeup.
In male-to-female labiaplasty, the skin of the penis is removed and its erectile tissue is discarded. The glans penis is reshaped and repositioned into a clitoris (clitoroplasty), and after the testes have been removed (if they hadn't been previously removed by an orchiectomy), the skin from the scrotum is reshaped into a set of labia minora and labia majora, and a clitoral hood, if requested by the patient. Also, the urethra is trimmed to the appropriate length and repositioned just to the south of the clitoris.
Slight abdominal tunneling is also performed by the surgeon, usually with a result of 4 to 8 inches vaginal depth.
The surgery takes 2 to 3 hours to complete, and is usually done under general and local anesthetic. Physical recovery generally consists of a few weeks, and the resultant scarring is minimal.
Sources: http://www.annelawrence.com/meltzersrs01.html (be very careful, the pictures at this URL are extremely, mind-bendingly, psyche-scarringly graphic if you're unprepared for what you're seeing) / http://www.annelawrence.com/srsindex.html