It's a config setting - in Settings -> General you are given two options, WordPress Address (URL) and Site Address (URL).
You have the former pointing at the directory with the Wordpress installation in it and the latter at the root of your site.
Here's the Codex info on it;
Incidentally, modifying all the files paths is another option of course - you would use the same technique you would use when transferring a Wordpress site from localhost to live, or from a dev server to live. You can look at the second part of my answer in this thread;
How to push wordpress from mamp into hostgatorHow to push wordpress from mamp into hostgator
That interconnectit script is a huge timesaver when moving WP sites.