The Holy Grail
Excerpted from the Applefritter FAQ
Q: How do I turn this laptop/iMac screen into a monitor?
A: Put simply you don't. Whilst it is possible to use a laptop (or iMac) screen as a monitor it takes a large cash investment and a good understanding of electronics. If you are lacking in either of these departments don't bother, buy a cheap LCD with VGA connection on eBay instead.
If you really want to know more about using a laptop display on another computer then do a search of the hacks sections with 'holy-grail' as your keyword. You can also try visiting Earth LCD for more info regarding the required convertor boards.
The LCDs in iMacs fall under the "laptop screen" category as Apple designed the iMac's onboard video circuitry to drive the LCD directly, like laptops do. There's no intermediate controller to which you can simply feed a VGA or DVI signal.
Here's one of the best explanations of why using a laptop LCD for a monitor is a difficult project I've seen so far, courtesy of Eudimorphodon:
Laptop displays simply don't speak the same language as CRT monitors, electrically speaking. It requires a complex wad of electronics to turn output meant for a CRT into input suitable for an LCD, and that wad of electronics is referred to as the 'controller'. You won't find a controller you can salvage in your laptop anywhere, because it 'speaks LCD' directly, and thus doesn't need one.
It's not just a matter of pasting wires together, which is what everyone wants to think. Those controllers sell for anywhere from $150 to $300, and for most installations require custom cables and power supplies which may well run you another $150.