From: http://www.fysik.dtu.dk/~schiotz/comp/latextips/#bibspace

### Adjusting space between references in the bibliography.

LaTeX normally inserts extra space between each item in the bibliography. A quick but ugly way of removing this space is by setting \itemsep to -2mm (experiment to find the right length) inside the thebibliography environment:
\begin{thebibliography}\setlength{\itemsep}{-2mm}

This is not practical if bibTeX is used, as the thebibliography environment will be in the .bbl file, which is overwritten each time bibTeX is run. A better solution is a redefinition of thebibliography. I have cut out and modified the original definition, just include the bibspacing.sty package to set the spacing to zero. Another spacing may be selected by setting the \bibspacing length. To set the spacing to one line, use:
\usepackage{bibspacing}
\setlength{\bibspacing}{\baselineskip}

NOTE: If you use the natbib package, you should use natbibspacing.sty instead, and be sure to load it after natbib:
\usepackage{natbib,natbibspacing}