OAuth is an open protocol to allow secure API authorization in a simple and standard method from desktop and Web applications. It allows you the User to grant access to your private resources on one site (which is called the Service Provider), to another site (called Consumer, not to be confused with you, the User). OAuth is about giving access to your stuff without sharing your identity at all (or its secret parts).
OAuth is the standardization and combined wisdom of many well established industry protocols. It is similar to other protocols currently in use (Google AuthSub, AOL OpenAuth, Yahoo BBAuth, Upcoming API, Flickr API, Amazon Web Services API, etc). Each protocol provides a proprietary method for exchanging user credentials for an access token or ticker. OAuth was created by carefully studying each of these protocols and extracting the best practices and commonality that will allow new implementations as well as a smooth transition for existing services to support OAuth.