This question comes in from David Savini:
I have a small question. For my work, I have to use real size letter. The problem is that illustrator (cs2) don't do that, at least, as I know. For example if I want to have a 40 mm "A", it must be a 59,38 mm "A". How can I do to simplify my life?
Admittedly, it can be confusing to understand how type is measured, especially if you've never had any training in the art of type. My first paying job was actually as a typesetter, so hopefully this information will help you, or anyone else.
The value that you specify in Illustrator (or any other computer program for that matter) is the Point Size for the font that you specify. However, Point size isn't the total height of a single capital letter or a single character per say.
Above, you can see an "A" set at 72 points (which translates to 1"), and to the right, the same "A" scaled to actually BE 72 point in height. Why is the text that is set to 72pt smaller?
Well, it's because there are different attributes in a line of set text.
Text is set using a baseline (which insures that text set with multiple fonts alwaus lines up correctly), and a mean line that is measured at the height of most lowercase letters. The letter "X" is the one usually used, hence, the term x-height. The x-height of a font is measured as the distance between the baseline and the mean line. In general, capital letters extend above and beyond the mean line.
Other characters also extend beyond the mean line. These characters can include letters like a lowercase "h" or "l" for example. The parts of these characters that extend above the mean line are called ascenders. Ascenders often are even taller than capital characters. Some characters also extend below the baseline -- or example, a lowercase "g" or "y" -- and these are referred to as descenders.
The point size of a font is measured as the entire height of the font -- including the ascenders and descenders. In fact, you can think of this formula: Ascender + X-Height + Descender = Point Size.
If you quickly want to set some text to a specific actual height, convert it to outlines and scale it conventionally. But you really can't use the Point Size as a way to measure the physical height of a single character.
Just one thing to note on the subject of x-height. In general, the most important attribute of a font's readability is its x-height. Below is a screenshot of 6 different fonts -- all set at 72 pt. Yet they all look like they are different sizes. That's because each has a different x-height. When designing web graphics, it's usually a good idea to go with fonts that have larger x-heights as they will be more readable on a computer screen (like the fonts features towards the bottom of the list).
By the way, if you want more information about typography, I've found the book The Complete Manual of Typography by James Felici to be most excellent.