You have to tread very carefully if you are looking for another opportunity while still employed. If your boss finds out it could cause problems in your current job - especially if you don't end up leaving. And the worst case scenario is that you could be fired if they feel you were looking on company time and using the company's resources to aid your job search.
There are two questions around the subject featured in the Boston Globe which deal with the subject.
One deals with the possibility that your boss might ask you directly if you are looking for another job. This is a loaded question and is fraught with all sorts of implications depending on your response.
The best response in the article (in my opinion) is this one : If you're looking but don't want to show your hand, simply respond: ''I'm always thinking about my future and exploring opportunities here and elsewhere. If anything gets serious, you can be sure I'll let you know."
One thing to remember is that your boss is also taking calls from headhunters as well and would definitely consider a better opportunity if it came along. So another way of phrasing it would be: "No I am not looking but I get the occasional call from headhunters pitching a job as I am sure you do" This might remind your boss that taking a call from a headhunter doesn't mean you are looking.