This is an unmasked Phase II, safety and efficacy trial of subjects with biopsy-proven IPF who have failed or are not candidates for standard therapy with corticosteroids and/or cytotoxic drugs. The study doctors are interested in studying the effects of the oral drug Thalomid(R) on IPF. Thalomid(R) (thalidomide) is an approved medication for Hansen's disease (leprosy). It is know to have anti-inflammatory effects and effects on fibrosis. It is hoped that Thalomid(R) may prevent progression of IPF.