I've asked this question around before but never ended up figuring out how to actually accomplish what I was trying to do. I've been told different things by people and most of the info I find online is really old... or is confusing. I really just need some specific help.

I have a Debian 5 system with two nics. eth0 is set up with dhcp-client which will receive a public ip address from my isp. The eth1 will be for my local network and I want to use dhcp-server daemon to serve addresses to my internal network.

The area I am confused about is how transmissions are getting sent between nics. I've been told to enable tcp forwarding but I don't understand how that would work since the nics have different network addresses... unless tcp forwarding is basically nat or something..

You are right and you also need NAT since private IPs will not be routed on public routers

http://wiki.linuxquestions.org/wiki/..._a_gateway/nat

Well, that's something you learn when studying networking basics. Seems to me, you should consider reading something like this:
http://tldp.org/HOWTO/NET3-4-HOWTO.html, old but some parts are still pertinent. Or this: http://www.linuxhomenetworking.com/wiki/index.php/Quick_HOWTO_:_Ch03_:_Linux_Networking, newer info. And some "Networking 101" books. There are some CCNA books that are pretty good, IMHO.

Anyway, a quick-and-dirty answer: The way in which packets are transferred between different NICs (between different networks, that is) is called "Routing". You configure your gateway with some info, called "routing tables", which are used to decide where a packet should go. For example, one packet wants to go to your LAN, then your gateway routes it through the NIC that is connected to the LAN. If another packet wants to go to the Internet, then your gateway routes through your ISP connection.

If what you want is getting your LAN to access the Internet through your gateway, then yes, you could use NAT/Masquerading