You can also achieve this effect using XML, as seen here, which removes the limitation of the answers provided which all seem to include recursion in some fashion. The particular use I've made here allows for up to a 32-character delimiter, but that could be increased however large it needs to be.
create FUNCTION [dbo].[Split] (@sep VARCHAR(32), @s VARCHAR(MAX))
RETURNS TABLE
AS
RETURN
(
SELECT r.value('.','VARCHAR(MAX)') as Item
FROM (SELECT CONVERT(XML, N'<root><r>' + REPLACE(REPLACE(REPLACE(@s,'& ','& '),'<','<'), @sep, '</r><r>') + '</r></root>') as valxml) x
CROSS APPLY x.valxml.nodes('//root/r') AS RECORDS(r)
)
Then you can invoke it using:
SELECT * FROM dbo.Split(' ', 'I hate bunnies')
Which returns:
-----------
|I |
|---------|
|hate |
|---------|
|bunnies |
-----------
I should note, I don't actually hate bunnies... it just popped into my head for some reason.
The following is the closest thing I could come up with using the same method in an inline table-valued function. DON'T USE IT, IT'S HORRIBLY INEFFICIENT! It's just here for reference sake.
CREATE FUNCTION [dbo].[Split] (@sep VARCHAR(32), @s VARCHAR(MAX))
RETURNS TABLE
AS
RETURN
(
SELECT r.value('.','VARCHAR(MAX)') as Item
FROM (SELECT CONVERT(XML, N'<root><r>' + REPLACE(@s, @sep, '</r><r>') + '</r></root>') as valxml) x
CROSS APPLY x.valxml.nodes('//root/r') AS RECORDS(r)
)