I have an autocomplete field and am just wondering how can i use it for multiple words? When i type the first word it works perfect, but when i space and type in the second word
Looks like you can't, the built in implementation doesn't support it - you can see in the link above: "is not part of the stable release or distribution".
However, I've downloaded and use the external version, available here:
http://bassistance.de/jquery-plugins/jquery-plugin-autocomplete/
it's a little bigger, but the usage is exactly the same, you don't have to change anything, for multiple selection, add to the options {multiple:true}
Update
JQueryUI has now been updated for the newest versions making this answer obsolete. An uptodate example can be found here
http://jqueryui.com/demos/autocomplete/#multiple