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Telling your boss bad news is no different than telling anyone else bad news, it's best to be upfront and direct. If you must tell your boss something unpleasant, beating around the bush or trying to make the situation seem better than it is will not help, and might in the long run make things worse.
No matter what temperament your boss falls under telling them bad news is never a fun task. But it is a situation that will likely occur. It's best to address the bad news head on. Bring it to your boss's attention as early as possible. The longer you wait to tell him, often the worse the news gets or seems. Avoiding the situation never makes it go away. Another bonus, by bringing to light a bad situation early on sometimes preventative actions can be taken so that the situation does not get worse. Damage control can be started right away.

Be honest with your boss. Don't sugar coat the news. Tell him the facts of the situation. The who, what, when, where, why, how and don't try and downplay the seriousness of it.
If by chance you did make a mistake and the bad news is a result of you screwing up, take ownership of your mistake. Even though your boss initially might be upset he will respect your ability to take responsibility and your honesty.
Additionally, if you can come up with some solutions to the problem it's helpful to present those to the boss after you've explained your mistake. This shows that you are willing to correct what you have messed up and that you're being proactive in trying to solve the problem.
While it's intimidating to have to present bad news to your boss if you handle it in a calm, respectful, honest way the situation can be handled quickly and you can move on to figuring out a solution to the bad news.

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