Time to update this tip as times have changed and airlines have come and gone since I last put one here! Rex (Regional Express) fly from Sydney to Ballina (the closest airport to Byron Bay) and also to Lismore (north-west of Byron but still manageable).
Rex fly 36 seat Saab 340 aircraft and have about 3 flights per day on weekdays to these airports and 2 flights per day on weekends. Flying time is 1hr 35 to Lismore and 1hr 40 to Ballina and the flights are quite good as you get some great views flying up the coast. Rex is a full service airline so you will usually get a small snack and a tea or coffee on your short flight (a bit of a rarity nowadays!)
The fares aren't too bad (considering they are the only airline into Lismore) - usually around $100 each way. Check into their website occasionally though as they have sales during the year when you can score some good discounts.
Despite a bit unconfortable going by bus is one of the cheapest way to go from sydney to Byron bay. The travel is long: i started at 10:30 pm from sydney central station and i got in Byron at 10:30 am in the following morning. You can buy a single ticket or a pass that allows you to travel along all the east coast making some stops.