It's easier with the enumitem package:
\documentclass{article}
\usepackage{enumitem}
\begin{document}
Less space:
\begin{itemize}[noitemsep]
\item foo
\item bar
\item baz
\end{itemize}
Even more compact:
\begin{itemize}[noitemsep,nolistsep]
\item foo
\item bar
\item baz
\end{itemize}
\end{document}
The enumitem package provides a lot of features to customize bullets, numbering and lengths.
The paralist package provides very compact lists: compactitem, compactenum and even lists within paragraphs like inparaenum and inparaitem.