For how to set the timer scaler see section 15.11.2 of the ATMega168 data sheet. There's a link from the hardware page on this site.
There are some comments for the millis() function that tell how it works in the wiring.c file.
To see where it is set, look in the wiring.c file. Search for the register name TCCR0 or TCCR0B.
Hmm.... it seems to be set to 64 now, instead of 8. That means the timer ticks once for every 64 clock cycles. Wonder when that happened. That means the counter won't overflow as much, but delayMicroseconds won't be as accurate.
HTH,