From http://postgis.refractions.net/docs/ST_Distance.html
--Geometry example - units in planar degrees 4326 is WGS 84 long lat unit=degrees
If ST_Distance is given two geometries, it assumes those geometries are really in cartesian (or planar) coordinates. Thus, the units are the same as those in the coordinates -- usually metres or feet.
Your problem seems to be that your spatial reference system, 4326, actually uses (angular) geographic coordinates -- degrees long-lat -- so the results are in (somewhat meaningless) degrees.