How can I set the Mac OS X terminal history to act like linux when using up/down arrows?
Mark who commented on my questions above was correct. This is a bash setting. If you add the following to your ~/.bash_profile script, you will get this behavior.

HISTCONTROL=ignoredups


You can also ignore any lines that start with a space:

HISTCONTROL=ignorespace


Or do both, by using:

HISTCONTROL=ignoreboth