Generally showing the error near where the error occurs is best. i.e. if someone has an error with entering their email, you highlight the email input box.
This article has a couple good examples. http://uxdesign.smashingmagazine.com/2011/05/27/getting-started-with-defensive-web-design/
Also twitter bootstrap has some nice styling that helps with that (scroll down to the Validation states section) http://twitter.github.com/bootstrap/base-css.html#forms
Highlighting each input box is a bit more complicated, so the easy way would be to just put an bootstrap alert at the top with details of what the user did wrong. http://twitter.github.com/bootstrap/components.html#alerts