I have a VPS running Ubuntu 10.04, and I'd like to give someone SFTP access to a single directory, but prevent them from seeing anything else on the system. What's the best way to pull this off?

I considered removing "everyone" permissions from everything on the system, but that seems like a really blunt tool for this problem (and one that'll cause other issues) - I'm hoping there's a better option here.

Edit: I appreciate the answers! (And I learned a bunch reading/researching through them). I ended up finding and using this guide from Linode as it spelled all the steps: http://library.linode.com/security/sftp-jails/