"A fully and rapidly reusable system is fully required for life to become multi-planetary, for us to establish life on Mars," Musk said. "If planes were not reusable, very few people would fly."
Currently, a Falcon rocket costs between 50-60 million dollars to build and launch, with fuel and oxygen costs making up just 200,000 dollars. Then, it is lost forever as it burns up on re-entry into Earth's atmosphere.
If engineers could reuse a rocket, that would bring the capital cost of a launch way down and "allow for about a 100 fold reduction in launch costs," he said.
Musk, an Internet entrepreneur who founded PayPal and has used his billions in earnings to start the electric car company Tesla Motors and SpaceX, said others have tried and failed to figure out how to craft a reusable launch system.
"In the last 12 months I have come to the conclusion that it can be solved," he said.
source:
http://www.google.com/hostednews/afp/article/ALeqM5jMTThnaKgXkpHM0nxkiiE5tRhhKQ?docId=CNG.13fe8544a6e090af0506874197e65650.271

The smallest part to return is the Dragon capsule, and it looks like they think they can use the abort motors to return it. Sounds nuts, but they way they have designed it, it might just need extra fuel.

Lots of unknowns here, but at least they are seriously looking at this, with a suborbital test spacecraft called "Grasshopper" in the works already to try stuff out.