Prediction markets have hit the mainstream media. Bill Saporito at Time.com notes the many potential uses for prediction markets:

The power of markets, it turns out, has something to say about practically everything. We see it at work on Wall Street, which absorbs the collected wisdom of millions of investors and expresses it as stock prices. Prediction markets now let people bet on everything from sports scores to election results to the expected capture of al-Qaeda bigwig Abu Mousab al-Zarqawi.

Chris F. Masse, whose excellent site is a first stop for any one interested in prediction markets, defines prediction markets:

Prediction markets aggregate information and produce running-time probabilistic predictions about future events.

These many applications would not necessarily be available without the benefits of the Internet. Computer power has allowed for finance academicians to test any number of relevant theories in regards to security pricing. It will be interesting to see longer-term research on the accuracy of prediction markets.

The wiki on prediction markets is quite comprehensive. The section on the theoretical issues with prediction markets, as currently constructed, is very interesting.

It will be interesting to see if prediction markets become as mainstream as the traditional capital markets. Every night on the evening news you can get a quick hit on what the stock market did that day. Will we ever see a report on the changing odds of Osama getting captured?