The prize went to Peter Diamond, Dale Mortensen, and Christopher Pissarides for their work on search in markets, that is, markets where sellers and buyers don’t automatically get to meet each other and so waiting for a better price might be the optimal thing to do, which prevents perfect market clearing from ever occurring. Obvious application: the labor market, especially in times of high unemployment, such as now. Political overtones: Peter Diamond was blocked from being appointed to the Fed by the Senate, where concerns were raised about his competence. Hah!
Rather than write more about this very important topic, I recognize that I cannot compete with the blogosphere. Here are some links to read more.
First, the official documents from the Nobel committee: http://static.nobelprize.org/nobel_prizes/economics/laureates/2010/press.pdf
The Economist.com site has a nice overview article here: And the Nobel goes to…
Over at marginalrevolution.com, Tyler Cowen has a bevy of articles, rich in background and document links:
Some personal observations on the prize
Christopher A. Pissarides
A prize for unemployment
Dale T. Mortensen
Peter A. Diamond