Here's the bread and butter from the US IRS on expat income. It's actually pretty straight forward. There's no secrets about it. As mentioned above, it's when you try to pull a fast one on the government that you actually start getting tangled up on grey areas and such.
IRS Publication 54.
The whole document is a good read (mandatory read if you are a US expat, IMHO), but pay special attention to Chapter 4 - Foreign Earned Income Exclusion/Deduction.