Magnetic sensor (Hitachi HM55B; here is a manual) and processor (Arduino). Pictured is the NG version of Arduino, though I am now using the Decimila, which starts up faster and provides a handy 3.3v supply. If you want to buid a wireless version, you might consider getting the version of Arudino with built-in BlueTooth; though pricey ($150 versus $95 for Arduino + BlueTooth module), you can upload your code wirelessly, and will not need to deal with radio configuration hassles.

The eight orange & red wires on the right side of the board provide current to the motors (one wire each; the other wire connected to each motor runs to a common ground on the bread board). The two purple and one white wires at the bottom of the right side run to the compass module. Not shown: BlueTooth radio, which is now connected to digital out pins 0 & 1 (aka RX & TX). This module seems to act exactly like the more famous BlueSmirf device, also from SparkFun, so if you run into trouble, solutions / forum responses should apply to both.