We all know the chaos that would ensue if every driver on the road traveled in any direction he or she wanted, never signaled, had no brake lights and defended that independence fiercely with no worries about ever getting a traffic ticket. But basically, that's how most people go boating! Sure, there are rules of the road, but many boaters either don't know them or pay no attention.
While attitudes are changing slowly with the advent of state-required boating certificates and mandatory education, there's still nobody really enforcing the finer points of the rules - such as signaling your intentions to surrounding vessels. You do this by using your horn with a proscribed pattern of blasts.
Every rule I address here can be found in the U.S. Coast Guard's rules of the road manual. You can buy a copy at amazon.com or your local chandlery, or you can simply visit navcen.uscg.gov, and download both international and inland rules for free.
Boats shorter than 39.4 feet aren't required by law to carry a whistle or bell, but must have "some way to make an appropriate signal." Ergo, every boat built in America has some sort of horn.
If you regularly operate in a region prone to fog, it might be worthwhile to invest in one of the latest loudhailers. Most of these relatively inexpensive systems have preprogrammed fog signals, so you can simply push a button for the type of boat and function you are engaged in, and the hailer automatically sounds the correct signal at the appropriate intervals.
The powered vessel overtaking another vessel must stay out of the way of the vessel ahead. In order to avoid surprises (like collisions), the overtaking vessel must signal both the intent to pass and on which side. One short blast of a horn means you will pass to the right. Two short blasts means you'll pass to the left (like the fast lane). As with all horn signals, the vessel being overtaken must respond with agreement (by sounding the same signal) or with disagreement (by sounding the danger signal of five short blasts). Note that you can never answer one blast with two or vice versa.
Head to Head
Just as we drive cars on the right side of the road here in America, the standard in nautical terms is the same - pass portside to portside. In this case, neither vessel has the right of way. Just to be sure, each boater should sound one short blast on the horn. However, if for some reason you plan to pass starboard to starboard, you would issue two short blasts and hope the oncoming vessel agrees. By the way, those readers who travel down the Mississippi River or certain western rivers to get to open water should remember that a vessel traveling down-current always has the right of way for obvious maneuverability reasons.