actually you don't need to use iptables to do what your trying to do.
Sure you do, otherwise IPtables won't SNAT the packets...
iptables -t nat -A POSTROUTING -o eth0 -j MASQUERADE
is the key rule. If you have a static IP address (internet side), you will want to use proper SNAT instead of Masquerade, as Masquerade has extra code to deal with dynamic IP connections which makes it less efficient.
This should help:
That said, you still need to add the ip_forward functionality as chrisortiz shows...