The space is caused by the default margin in your H1 tag. As such, you need to define a style for H1:
You can add padding to move the H1 away from the edges of the surrounding DIV.
EDIT:// An after thought. If you are "Playing with fluid layouts", you might want to consider not using heights and/or set the heights/widths in % values.
Please note also that if you set the h1 margin-top to 0 in your css, it will affect all use of h1 throughout the page or any page that uses the same css file this relates to. If you only want it to style that one h1 tag, there are many ways to do so. You could use an inline style:
<h1 style="margin-top:0">Welcome to Liquid Layouts</h1>
I wouldn't use inline style. It's not flexible when putting on multiple pages. Set a class if needed, or I suppose follow on from what has been done already in your CSS:
div#content h1, h3
I agree Rik, a class would be better use for this instance.
<h1 class="noMarginTop">Welcome to Liquid Layouts</h1>