How do you calculate the distance between 2 cities?
If you need to take the curvature of the earth into account, the Great-Circle distance is what you're looking for. The Wikipedia article probably does a better job of explaining how the formula works than me, and there's also this aviation formulary page that covers that goes into more detail.
The formulas are only the first part of the puzzle though, if you need to make this work for arbitrary cities, you'll need a location database to get the lat/long from. Luckily you can get this for free from Geonames.org, although there are commercial db's available (ask google). So, in general, look up the two cities you want, get the lat/long co-orinates and plug them into the formula as in the Wikipedia Worked Example.
Other suggestions:
Last but not least, Joel wrote an article about this problem a while back, so here you go: New Feature: Job Search