Distance between two points, range finder

Hi,
has any of the wise guys here been into a project or knows how to solve this - say you have 2 objects (with an MCU/Arduino attached) and you want to measure the distance between them - how do you do that? Accuracy in the cm range (an error less than a cm is ok). Ranges - 0.5 - 50 meters. (Probably in the longer ranges the accuracy can degrade to 10cm). Light - daylight, 50/60Hz artificial light, CFL (20Khz), none.
I've been reading about IR but so far the 16 MHz of an Arduino, the speed of a IR phototransistor and the need to encode a signal over some carrying frequency are some major problems I've stumbled upon.
Do you have some practical advise, solution, a book to look at?

Well, a SICK laser is going to do the job.
http://www.sick.com/group/EN/home/products/product_news/Pages/productnews_overview.aspx
Probably not on budgetary grounds, though.

Your problem space isn't too well defined.
You don't say if you already know if the target is there or not, how big the objects are (car-sized? tennis ball-sized?), if it is moving, what markers your could put in the play-area, what false returns you might get (is the play area enclosed with reflective walls?), what update rate you want...

Fifty metres probably puts most ultrasound solutions out, unless you had a large array of the polariod-type sensors, timed and synced to a strobe light.

I assume a contactless system, otherwise I'd go with a tape reel and shaft encoder.

Hack one of those golf laser rangerfinders?

Well the problem comes out of an idea for a game (or toy enhancement). It's not defined clearly yet though.
The objects might be some stuffed toys, boxes, plastic cars.
Maybe I should reduce the problem to finding the distance between two objects that are being independently positioned somewhere in a room with less than 10 meters between them, clear line of sight (at most times). I would like them to not depend on an additional marker. Rate of updates is ok to be 1-30Hz (can be lower).

Edit: Thanks for the SICK sensors site! All those European gadgets are perfect and I'm sure they do work just fine, but you know - it must be less then 10$ to qualify :).