Newbie to AJAX, I have recently used ajax for my validation handling, and I am planning to add a drop down menu for city and state. Both data are being pulled from two seperate tables in a mysql dbase. I have looked around for sample codes but havent found one that addresses this. Any help would be greatly appreciated.

You can always make two server trips and pull the required information one at a time. Another way would be to use JSON to pull in data in a single server trip by sending the data in the form:
{ city: ['C1', 'C2', 'C3'], state: ['S1', 'S2', 'S3'] } and interpreting it accordingly using Javascript.

All you need to know to successfully complete the above exercise is how to make an Ajax request which in itself is pretty simple; more so when using lightweight Ajax libraries like Ajax Toolbox.