Press the down button and navigate to Monochrome. I have an XSI but it should be the same on the XTi. Also you can do it in post processing ;D.
The best way to take B&W photos is to shoot in colour and then convert to B&W in post-processing. In-camera, if you're shooting JPEG, the camera will just dump the colour information (which is *not* something you should ever want to do); the equivalent of just hitting "Grayscale" in Photoshop. If you shoot RAW, the colour information will still be in the RAW file, but I keep it on colour; it's such a simple thing to do and do better in post that it's not worth the time to do it on-camera. If you really want to have the camera do it for you, find the "Picture Style" setting in the menu, and change it to "Monochrome". Edit: Ah, so the down button does. I wish I could re-map that to something else. I handle all the contrast, vibrance and saturation in post, which is all those "picture styles" give you anyway.
You can't make black & white images in your camera. You can only make Monochrome images, which are not the same thing. As mentioned black & white images are made in post processing from color images. In Photoshop a black & white adjuistment layer is made and the colors red, green, blue, yellow, magenta (RGB) are manipulated to control the contrast. Several other techniques are also use to manipulate contrast in other ways. You may want to search for information on Ansel Adam's Zone System. Many people think it's real easy to make B&W images. Actually, it's a bit harder than making color images.