Edit in JSFiddle

$(document).ready(function() {
    $('ul#filter a').click(function() {
        $(this).css('outline','none');
        $('ul#filter .current').removeClass('current');
        $(this).parent().addClass('current');
        
        var filterVal = $(this).text().toLowerCase().replace(' ','-');
                
        if(filterVal == 'all') {
            $('ul#portfolio li.hidden').slideDown('slow').removeClass('hidden');
        } else {
            
            $('ul#portfolio li').each(function() {
                if(!$(this).hasClass(filterVal)) {
                    $(this).slideUp('normal').addClass('hidden');
                } else {
                    $(this).slideDown('slow').removeClass('hidden');
                }
            });
        }
        
        return false;
    });
});

<!--[if lt IE 7]>
<style>ul#portfolio li { margin-right: 5px; }
</style>
<![endif]-->
<div id="container">

    <ul id="filter">
        <li class="current"><a href="#">All</a></li>
        <li><a href="#">red</a></li>
        <li><a href="#">blue</a></li>
        <li><a href="#">green</a></li>
        <li><a href="#">yellow</a></li>
        <li><a href="#">black</a></li>
        <li><a href="#">xmas</a></li>
    </ul>

    <ul id="portfolio">
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="green xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-green.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="green xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-green.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="green xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-green.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="green xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-green.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="green xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-green.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="green xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-green.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="green xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-green.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="red xmas"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-red.jpg" alt="" height="100" width="100" /></a></li>
        <li class="yellow"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-yellow.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
        <li class="blue"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-blue.jpg" alt="" height="100" width="100" /></a></li>
        <li class="black"><a href="#"><img src="http://kachibito.net/wp-content/uploads/2011/10/00-black.jpg" alt="" height="100" width="100" /></a></li>
    </ul>
</div>

/* Portfolio Filter Stylesheet */

/*****Reset*****/
html, body, div, h1, h2, h3, h4, h5, h6, ul, ol, dl, li, dt, dd, p, blockquote, pre, form, fieldset, table, th, td { margin: 0; padding: 0; }


body { color: #333; font: 12px/18px Verdana, Helvetica, Arial, sans-serif; }


a { color: #333; }
a:visited { }
a:hover { text-decoration: none; }
p, ul, ol, dl, table { margin-bottom: 18px; }
ul, ol, dd { margin-left: 36px; }

/*****Custom Classes*****/
.clearing { clear: both; }
.last { margin-bottom: 0; }
.screenReader { left: -9999px; position: absolute; top: -9999px; }

/*****Basic Layout*****/
div#container { margin: 20px auto 0; overflow: hidden; width: 640px; }

ul#filter { float: left; font-size: 16px; list-style: none; margin-left: 0; width: 100%; }
ul#filter li { 
    border-right: 1px solid #dedede;
    float: left;
    line-height: 16px;
    margin-right: 10px;
    padding-right: 10px;
}
ul#filter li:last-child { border-right: none; margin-right: 0; padding-right: 0; }
ul#filter a { color: #999; text-decoration: none; }
ul#filter li.current a, ul#filter a:hover { text-decoration: underline; }
ul#filter li.current a { color: #333; font-weight: bold; }

ul#portfolio { float: left; list-style: none; margin-left: 0; width: 672px; }
ul#portfolio li { 
    border: 1px solid #dedede; 
    float: left; 
    margin: 0 10px 10px 0; 
    padding: 5px;
    width: 102px;
    background:#f7f7f7;
}
ul#portfolio a { display: block; width: 100%; }
ul#portfolio a:hover { text-decoration: none; }
ul#portfolio img { border: 1px solid #dedede; display: block;  }