If target creature has toughness 5 or greater, it gets +4/-4 until end of turn. Otherwise, it gets +4/-X until end of turn, where X is its toughness minus 1.
11/1/2005 Has changed slightly in functionality, with the old continuous nature of the toughness reduction gone away; the toughness change remains static. For example, if you have three Swamps and Nightmare on the battlefield and then cast Blood Lust on it, it will become 7/1. If one of your Swamps is subsequently destroyed, your Nightmare will become 6/0 and be put in the graveyard.