This build is based on http://www.instructables.com/id/uDuino-Very-Low-Cost-Arduino-Compatible-Developme/step5/OR-internal-oscillator-board-build/.
Also see http://www.patrikhermansson.se/?q=node/431 for the basics.
The idea is to use the Atmega:s internal oscillator, thus removing the external crystal. The price is a lower clock-speed and a less accurate clock. This construction is therefor not suitable when timing is crucial, as with serial communications.
The fuses of the Mega is set as (l,h,ext) E2 DF F8, lock bits CF. The bootloader used is Lilypads ("hardware/arduino/bootloaders/lilypad/LilyPadBOOT_168.hex" in the Arduino IDE folder).
The schematics are like Breaduinos but without the reset switch, crystal and it's capacitors.