New Pages as DIRECTORIES rather than as ?P=618

Greetings

I am using WordPress 2.7.1 on a site hosted on 1and1.com.

Currently, when I create a “NEW PAGE” on wordpress, it gives it a URL that ends in something like ?p=512 (as the 512th page, I guess). Enough of these and you can’t really manage them.

I have seen a few sites where people have pages set up as separate directories such as “wordpress.com/this-is-a-new-page” instead.

Any idea how I can do that?

Thanks!