Many people want WordPress to power their site’s root (e.g. http://example.com) but they don’t want all of the WordPress files cluttering up their root directory. WordPress allows you to install the WordPress files to a subdirectory, but have your blog exist in the site root.The process to move WordPress into its own directory is as follows:

1. Create the new location for the core WordPress files to be stored (we will use /wordpress in our examples).
2. Go to the Options panel.
3. In the box for WordPress address (URL): change the address to the new location of your main WordPress core files. Example: http://example.com/wordpress
4. In the box for Blog address (URL): change the address to the root directory’s URL. Example: http://example.com
5. Click Update Options.
6. Move your WordPress core files to the new location (WordPress address).
7. Copy the index.php and .htaccess files from the WordPress directory into the root directory of your site (Blog address).
8. Open your root directory’s index.php file in a text editor
9. Change the following and save the file. Change the line that says:
   require('./wp-blog-header.php');
   to the following, using your directory name for the WordPress core files:
   require('./wordpress/wp-blog-header.php');
10. Login to the new location. It might now be http://example.com/wordpress/wp-admin/
11. If you have set up Permalinks, go to the Permalinks panel and update your Permalink structure. WordPress will automatically update your .htaccess file if it has the appropriate file permissions. If WordPress can’t write to your .htaccess file, it will display the new rewrite rules to you, which you should manually copy into your .htaccess file (in the same directory as the main index.php file.)

Retrieved from:http://codex.wordpress.org/Giving_WordPress_Its_Own_Directory