Whilst one can use the Measure Tool to straighten horizons, a quicker method that I prefer is using the Crop Tool. The advantage to this is that it saves having to crop after rotating your image and you can set it to retain the aspect ratio of the image - usually I also use it to retain the overall image dimensions by having it enlarge the cropped area slightly.

Firstly locate the Crop Tool. In PS7 it's third from the top in the lefthand column of the toolbox. In its basic mode it allows you to draw a rectangular selection over an image and crop to that selection. However, as well as that it allows you to rotate the selection and even resample the selection to a given size.

I prefer (unless the skew is very bad) to have the straightened image resized to the original size so I have entered the Width, Height and Resolution values of the original. If you leave them all blank the tool will simply crop the image without resizing - it will also not be constrained to an aspect ratio.

Having set the tool options, I now draw a selection over most of the image, as below;

Once I'm happy with the selection angle and size, I'm ready to commit to it.

Either a double-click within the selection area or clicking on the Tick button in the tool bar will make the changes;