1. Create a category to contain the featured products. Call it e.g. Featured” or “Home Page”.
  2. Set “Is Active” to No. That way, it won’t display in the catalog menu.
  3. After saving the category, please note what ID it gets. You can see it in the last part of the URL. If the URL ends with catalog_category/edit/id/8/, the ID is 8. On later version, the ID is next to the category name.
  4. Add products for the home page to the new category.
  5. Edit the Home Page (CMS → Manage Pages → Home Page) and add the following content, where 8 should be replaced by your category ID: 
{{block type="catalog/product_list" category_id="8" template="catalog/product/list.phtml"}}

If you want a view that is different from the category lists, you can copy and modify list.phtml and change the path above.

Source: Magento Wiki