CSS Library: Vertical CSS Menus: Here
Sliding Doors Vertical Menu
Author: Dynamic Drive
This nicely padded vertical menu swaps between two background images depending on whether the mouse is over or out of a menu item. To ensure a perfectly smooth transition between image change (especially in IE), it uses the Sliding Doors technique and a single background image that merges the two backgrounds into it.
The single image used (resized horizontally):