Hi y'all, just saw this!
Actually, there are 4 different methods, that I know of, to do intarsia in the round! I have Silver to thank for learning these. She turned me onto a great article in Interweave Knits (Fall 2003), which you can buy a back-issue of from their website (here) if you want, that outlines all 4 methods, with pictures.
One, as Ingrid says, requires carrying the main color through the pattern. Another, as sogrammatical has figured out (WTG! ), works back and forth, as if the piece were flat really, but allows for the turning point to be joined to itself as you go, creating a circular piece. It does create a visible seam at this juncture, but this is probably the most popular method, as it's fairly straightforward and easy to remember.
This method typically uses an increase and a decrease at the seam point, to prevent a hole when you turn the work:
At the beginning of the knit side row, begin with a yo (increase), and work (doing standard intarsia) until the end of the row. On the last stitch, do an SSK decrease with that stitch and the yo.
At the beginning of the purl row, do a yo increase, and at the end, do a p2tog decrease with the last stitch and the yo.
The other two methods are also very useful. My favorite one is totally seamless, and allows for solid color blocks. If I ever shoot a DVD of advanced techniques, that will be on it! In the mean time, I recommend buying the back issue of that magazine; it's a great issue, and also has one of my favorite hat and mitten patterns. Issue available here.