₪₪₪ Why does the IRS with hold your current year tax refund and bill you for the total previous year balance?

Not regarding the Bush stimulus money, but I was suppose to get back about $800 this year from the IRS for filing my 2007 taxes. I recieved a notice that this was with held due to the fact that I owe the IRS $800 from 2005.

Will they mail me my refund since they billed me? Or are they just going to automatically take my refund to pay for the balance?