How do I automatically run an application on USB attach or CD insert on Mac OS X?

You can't. Autostarting applications is impossible under Mac OS X.

The next-best thing, opening the CD folder and showing the installer icon, can be done by using (AutoOpen version 1.0) to make a .dmg which can then be burnt to a CD.

Basically, auto-run is considered a security problem and so is not supported in OSX. Sophie Alpert's answer is also a bit overkill. Most installers for OSX simply open up a folder to show the application and, possibly, a readme. Installing is done by dragging the app to your Applications folder.

For other kinds of apps on CDs (say, a slide show or something like that), the developer generally uses hidden folders to hide support data to ensure that the only thing the user will see when they open the CD is the single icon they're supposed to double click to start the app.