It's pretty easy to do:
- Create a folder in the target drive
- Hold down Command button and move the "~/Pictures/iPhoto Library.photolibrary" directory to the target drive
- Double click on the "iPhoto Library.photolibrary" directory to launch iPhoto.
That's it! It remembers the directory next time you launch it.
In the screenshot above, you can see the iPhoto Library directory at the bottom, and the target directory (/Data/pictures) on the secondary (SEAGATE) drive at the back right while library is being moved.
Note: My iPhoto version is 9.6. Also found this KB article from Apple describing the same process, so this seems to work for other versions as well: http://support.apple.com/en-us/HT1229