So, I have a motion sensor that (when it detects motion) sends 2.5v out. I have the + lead from the motion sensor plugged into digital pin 7. When It detects motion, I'd like it to (for now) light up an LED on digital pin 13. Below is my code. Please let me know why the heck this doesn't work.
Assuming you've got a Diecimilla, you're dealing with a 5V ATmega168. Page 303 of the datasheet tells us that VIH (voltage for a high input) is 0.6*Vcc. Vcc is 5V, so the minimum voltage to be recognized as a logic high is 3.0V, and you're feeding it 2.5V, so it's never going to go high.
I'd suggest playing with an analog input and use a threshold of 400 or so as "high" (400/1024 ~= 2V), or you can always add a transistor circuit to "convert" from 2.5V to 5V.