Lately, there was released a new dev version of Bledner 2.68 which has this awsome feature called Mist Pass. Below you can see two images first rendered with mist and second without.
How to set up mist.
1. Go to Scene panel and under passes tab select "Mist"
2. Optionally you can go to World panel and set up the mist under "Mist Pass" tab.
3. Go to Node Editor and click the Compositing and Use Nodes
4. Set up the nodes as shown below. This is the most basic setup and mist node works great already.
And that's it.