When you look at the sun, it's yellowish because you are looking at it head on.

When you look at the sky, you are looking at indirect light. That is light that is coming in perpendicular to your sight and then it scatters in the perpendicular direction (towards your eye).

Longer wavelengths scatter more forward (i.e. when you look directly at the sun) and shorter wavelengths scatter more in the perpendicular direction (i.e. when you look away from the sun at the sky).

Therefore more blue light scatters in the perpendicular direction and more red light scatters in the forward direction.

You can read this wiki article for more details:

http://en.wikipedia.org/wiki/Rayleigh_scattering

Edit:

Conversely, this also explains the red when the sun is setting/rising. When you see the sun setting, the sun's light has to go through A LOT of the atmosphere, since you're seeing mostly the forward scattering you see more red/orange (longer wavelengths).

View the original article here