The font most commonly used on road signs and highways in Canada and the U.S. is FHWA Series E Modified. This is a sans-serif font informally called Highway Gothic.
"FHWA" refers to the Federal Highway Administration. "Series E" refers to one of the variations of fonts (the differences are mainly thickness, width and horizontal spacing of the characters) and "modified" refers again to the thickness and width of each character.
FHWA was developed in WWII by the Public Roads Administration to "maximize legibility at a distance and at high speed" and hasn't changed much since then. Australia, Mexico, Spain and Peru also use the FHWA font series. Newer highways in China have begun adopting it as well.
Over the next few decades, the new Clearview typeface, also specifically developed for traffic signs by an independent design firm, is expected to gradually replace the FHWA series.
Clearview is slightly more rounded and thicker. Speculation has it the new font is being implemented to help a growing demographic of elderly drivers. Here's a side by side comparison:
Interstate Highway Markers (FHWA Typeface)
Interstate Highway Markers (Clearview)
Tourist destinations often eschew the standard font in favor of something more beautiful. Lunenburg's is the best one I've ever seen:
Designed in 1965 on a variation of the serif typeface Baskerville, Canada's wordmark (essentially the government's logo) is timeless, fresh and still extremely popular:
The Federal Government has installed 5,337 of these signs across the Canada over the past few years to keep citizens informed about the strategies in place to cope with the recession:
B.C.'s signs were painted in the U.S., which caused a media furor. Transportation minister Shirley Bond defended the decision by explaining that "there is a competitive bidding process and sometimes we go outside Canada...that is part of the process of finding the best value for dollars."
Lastly, these yellow and brown Parks Canada signs make me extremely nostalgic for the 80's and summers of camping as a child:
AdHoles Blog has a great post about "Summer Fonts" here.