How do I make a batch file terminate upon encountering an error?

Check the errorlevel in an if statement, and then exit /b (exit the batch file only, not the entire cmd.exe process) for values other than 0.

same-executable-over-and-over.exe /with different "parameters"
if %errorlevel% neq 0 exit /b %errorlevel%

If you want the value of the errorlevel to propagate outside of your batch file

if %errorlevel% neq 0 exit /b %errorlevel%

but if this is inside a for it gets a bit tricky. You'll need something more like:

setlocal enabledelayedexpansion
for %%f in (C:\Windows\*) do (
    same-executable-over-and-over.exe /with different "parameters"
    if !errorlevel! neq 0 exit /b !errorlevel!
)

Edit: You have to check the error after each command. There's no global "on error goto" type of construct in cmd.exe/command.com batch. I've also updated my code per CodeMonkey, although I've never encountered a negative errorlevel in any of my batch-hacking on XP or Vista.

The shortest:

command || exit /b

If you need, you can set the exit code:

command || exit /b 666

And you can also log:

command || echo ERROR && exit /b

Add || goto :label to each line, and then define a :label.

For example, create this .cmd file:

@echo off

echo Starting very complicated batch file...
ping -invalid-arg || goto :error
echo OH noes, this shouldn't have succeeded.
goto :EOF

:error
echo Failed with error #%errorlevel%.
exit /b %errorlevel%

See also question about exiting batch file subroutine.