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Be specific as you can as to why, without being derogatory towards the company or the person who interviewed you. This may be by saying "I appreciate the offer, but another company I applied to responded with a better salary/benefits/etc." While not very often, they may be willing to make a better offer.

If it is because of something you didn't like, such as the interviewer's attitude or poor working conditions you saw, you may want to temper your answer a little. Perhaps you could answer "I was hoping to work in a safer/cleaner/more friendly atmosphere." If they ask why or what happened, try not to be too specific here, as you may step on someone's toes; try something along the lines of "Based on the interview/environment, I felt I wouldn't fit in."

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Q: How do you politely declined a the job you interviewed for?
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