If you want to access files on the host machine from inside UML, you can treat it as a separate machine and either nfs mount directories from the host or copy files into the virtual machine with scp or rcp. However, since UML is running on the the host, it can access those files just like any other process and make them available inside the virtual machine without needing to use the network.
This is now possible with the hostfs virtual filesystem. With it, you can mount a host directory into the UML filesystem and access the files contained in it just as you would on the host.
Note that hostfs is currently not available on 2.5. The reason is that there was an fs.h rework early in 2.5 which required filesystem changes, and I haven't got around to updating hostfs to those changes.
To begin with, make sure that hostfs is available inside the virtual machine with
UML# cat /proc/filesystems
Now all you need to do is run mount:
UML# mount none /mnt/host -t hostfs
If you don't want to mount the host root directory, then you can specify a subdirectory to mount with the -o switch to mount:
UML# mount none /mnt/home -t hostfs -o /home
There is a hostfs option available on the UML command line which can be used confine all hostfs mounts to a host directory hierarchy or to prevent a hostfs user from destroying data on the host. The format is
 hostfs=directory,options
To specify append mode without confining hostfs to a host directory, just leave out the directory name so that the argument begins with a comma:
 hostfs=,append
It's possible to boot from a directory hierarchy on the host using hostfs rather than using the standard filesystem in a file.
To start, you need that hierarchy. The easiest way is to loop mount an existing root_fs file:
host#  mount root_fs uml_root_dir -o loop
none    /       hostfs defaults 1 1
host#  find . -uid 0 -exec chown jdike {} \;
Next, make sure that your UML kernel has hostfs compiled in, not as a module. Then run UML with the following arguments added to the command line:
 root=/dev/root rootflags=/path/to/uml/root rootfstype=hostfs
If you need to build hostfs because it's not in your kernel, you have two choices:
Reconfigure the kernel and set the 'Host filesystem' option under 'Processor features' to 'Y'. Recompile the kernel and reboot it.
Reconfigure the kernel and set the 'Host filesystem' option under 'Processor features' to 'M'. Rebuild the kernel modules. hostfs will be in arch/um/fs/hostfs/hostfs.o. Install that in /lib/modules/`uname -r`/fs in the virtual machine, boot it up, and
UML# insmod hostfs