It's simple, build a u-shape a block above the ground (or the moat/river; if you want to collect the drops, you'll need to have water flowing underneath the lava blade toward your base, just be sure it's only one block deep so mobs can't swim under the blade). Put a block under one of the sides, put a sign on it, and put lava on top of the sign. Hey presto, you've got a lava blade!
From above (your base is downward): (# is stone, L is lava, S is sign, W is water)
Top:
#S#
#L#
###
Level 2:
#W#
#S#
###
Level 3:
###
#W#
#W#
From the side (base is <----)
#LS
#SW
WW#
See also:
http://www.minecraftwiki.net/wiki/Tutorials/Mob_Farm