If you are not against using off-the-shelf products, check out my most recent blog post about how to use RPi to interface with a cheap wireless soil moisture sensor:
http://rayshobby.net/?p=9413
All that’s required is a 433MHz RF receiver connected to RPi. I am also working on decoding a few more such sensors and will publish the code soon.
If you are into building your own soil moisture sensor, a good starting point is the Chirp (http://wemakethings.net/chirp/): it uses an ATtiny44 and capacitive probe to detect soil moisture level. I was actually working on building a soil sensor myself a few weeks ago. My solution is to use a similar capacitive probe as Chirp used, but a Schmidt trigger to form an RC oscillator, and use Arduino’s pin 5 (counter) to detect the oscillation frequency, hence calculating the capacitance. Now that I’ve found cheap off-the-shelf sensors, I kind of feel it’s a lower priority to build my own.