The dirname command is the most basic, simply parsing the path up to the filename off of the $0 (script name) variable:
dirname $0
But, as matt b pointed out, the path returned is different depending on how the script is called. pwd doesn't do the job because that only tells you what the current directory is, not what directory the script resides in. Additionally, if a symbolic link to a script is executed, you're going to get a (probably relative) path to where the link resides, not the actual script.
Some others have mentioned the readlink command, but at it's simplest, you can use:
dirname $(readlink -f $0)
readlink will resolve the script path to an absolute path from the root of the filesystem. So, any paths containing single or double dots, tildes and/or symbolic links will be resolved to a full path.
Here's a script demonstrating each of these, whatdir.sh:
#!/bin/bash
echo "pwd: `pwd`"
echo "\$0: $0"
echo "basename: `basename $0`"
echo "dirname: `dirname $0`"
echo "dirname/readlink: $(dirname $(readlink -f $0))"
Running this script in my home dir, using a relative path:
>>>$ ./whatdir.sh
pwd: /Users/phatblat
$0: ./whatdir.sh
basename: whatdir.sh
dirname: .
dirname/readlink: /Users/phatblat
Again, but using the full path to the script:
>>>$ /Users/phatblat/whatdir.sh
pwd: /Users/phatblat
$0: /Users/phatblat/whatdir.sh
basename: whatdir.sh
dirname: /Users/phatblat
dirname/readlink: /Users/phatblat
Now changing directories:
>>>$ cd /tmp
>>>$ ~/whatdir.sh
pwd: /tmp
$0: /Users/phatblat/whatdir.sh
basename: whatdir.sh
dirname: /Users/phatblat
dirname/readlink: /Users/phatblat
And finally using a symbolic link to execute the script:
>>>$ ln -s ~/whatdir.sh whatdirlink.sh
>>>$ ./whatdirlink.sh
pwd: /tmp
$0: ./whatdirlink.sh
basename: whatdirlink.sh
dirname: .
dirname/readlink: /Users/phatblat