Lanterns were originally planned to be introduced in the Halloween Update as a craftable item. This feature was delayed because of the lack of time and has been moved to be implemented in a future update.
With the addition of the lantern, in the update Torches would now flicker out and need to be re-lit with Flint and Steel. The lantern would serve as a permanent source of light. According to Notch, when the update would occur, all torches placed on the map, in the inventory, and in Chests prior to the update would be converted to lanterns. To do this, the lanterns would use the (former) block ID of torches along with a re-skin.
The Glowstone introduced in the Halloween Update was a potential item requirement to craft lanterns, as it has the greatest luminance as a raw material. This would also make lanterns relatively inaccessible and a risky item to get, as has been hinted at by Notch. A second potential item that might have been required to create lanterns was Netherrack, it being a block that never burns out whilst lit. These items both can be obtained by going to the Nether.
On November 11, 2010, on his Twitter account, Notch claimed (likely as a joke) that "lamps" had actually stood for "Light A-givin' Material Portal Side... the yellow stone thing", probably referring to Glowstone. However, on January 13, 2011 Notch claimed that lanterns were "postponed", and added on January 20, 2011 that he was "not sure" when they would be implemented.
Lanterns were to produce light as they are being carried, making it a useful thing to have when cave exploring, but Notch stated on Twitter that he would not add torches as a mobile light source because he didn't like how it looked. Notch might have allowed it to be hung from ceilings but he was not sure. On the 12th of June, Notch also hinted at adding them, or at least that he's working on them. 
Lanterns and temporary torches were supposed to be added in Alpha 1.2.0: The Halloween Update. They were repeatedly postponed, until Notch announced on November 18, 2011, at the Mojang Panel at MineCon 2011, that lanterns would not be added to Minecraft because of a large negative community response. Instead, other types of lighting would be added; such as Redstone Lamps and glowstone.
- ↑ notchtweet:22743846228070400
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- ↑ http://www.youtube.com/watch?v=1XDLwMOwc5s#t=1h02m40s
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- ↑ https://s3.amazonaws.com/ld48/ld22/index.html - Minicraft game made by Notch for Ludum Dare 22.