Here's your answer, replacing all newlines (\n) with a tab so you can easily see what it's doing.
sed -i ':a;N;$!ba;s/\n/\t/g' file
the "-i" is for in place editing.
Here's my explanation from a tutorial I wrote back in 2005.
; (semicolon is just a command separator within sed)
sed (The command that calls the sed program)
:a (a marker which we use to iterate over and over)
N (Appends the next line to the pattern space)
$!ba (repeats the N command for all lines but the last line)
s/\n/\t/g (replaces all occurences of the newline character with tab)