Make sure the drive is formatted Mac OS Extended (Journaled)
1. Quit iPhoto
2. Copy the iPhoto Library from your Pictures Folder to the External Disk.
3. Hold down the option (or alt) key while launching iPhoto. From the resulting menu select 'Choose Library' and navigate to the new location. From that point on this will be the default location of your library.
4. Test the library and when you're sure all is well, trash the one on your internal HD to free up space.
To copy photos to an external drive select them in iPhoto and export to the external drive
To copy your iPhoto library to an external drive that is formatted Mac OS extended (journaled) drag it intact as a single entity to the external drive. This will not work with other drive formats.
To use the external drive for your active library after copying the iPhoto library over depress the option key and launch iPhoto and use the select library command to make it your default library