Torch is a type of block only found in Indev, Infdev, and Alpha. It is one of the few blocks that emit light, the others being lava, furnaces and fire. In addition, it adjusts its model in relation to the surrounding bricks, so that it looks like it's attached to any surrounding walls. Notch has said that torches will soon only be temporary sources of light, and that they will burn out over time.
Interesting Properties
Torches also act as a full square, for the purpose of placing other objects or torches in the same area. Being a solid brick, this even prevents sand from falling down past a square with a torch on it, making it possible to build a roof completely out of sand!
Since torches support sand, they can be used to create an environment based trigger. See Airlock.
Torches placed immediately above a dirt block will prevent grass from growing.
Gravel and Sand blocks that fall onto torches will immediately break.
Torches also melt nearby snow, making them useful to keep skylights from being snowed over in winter maps.
Redstone Variant
There is also a variant of torches that is made with Redstone and Sticks. It is mainly used in logic gates.