As you've probably heard in the news NASA announced that the Kepler space telescope (I'll make a post about the telescope at some point) had found a rocky almost Earth-sized exoplanet orbiting a distant star (which all exoplanets does, of course).
The Kepler telescope was launched in March 2009 and its mission is to find Earth-like planets around other stars. Since then the telescope has found more than 700 planet candidates and already 9 planets have been confirmed by ground based observations.
The Kepler telescope
The new planet is orbiting a star called Kepler-10 and the planet itself is called Kepler-10b.
Kepler-10b (picture from NASA)
The cool thing about this discovery isn't necessarily the size of the planet (although Earth-sized does draw more headlines) but also the fact that it is a rocky planet. Unlike the other exoplanets Kepler has detected this one isn't a gas giant like Jupiter or Saturn but a solid rock-based planet like Venus and Mars.
Kepler has detected other planets more comparable to Earth in size before, but this one is only about 40% larger than the Earth so it's pretty similar and it's rocky/metallic (or as the Bad Astronomer says, it's most likely molten and utterly uninhabitable).
How does Kepler detect planets?
As the planet orbits its parent star there is a small chance that it will move in front of the star, as viewed from Earth. If that happens the planet will block a tiny bit of the stars light and the star will appear dimmer.
If we observe a star which is consistently and periodically dimming a little bit, it is evidence that there might be a planet orbiting the star. Of course we cannot be certain at this point, but it is at least circumstantial evidence.
The Kepler site has an interactive explanation of this here.
Kepler is monitoring a specific part of the sky and observing the brightness of more than 100.000 stars. Over time it is possible to detect the periodic dimming which might be caused by planets.
The size of the planet can be calculated based on the amount of dimming occurring (for a Sun sized star a large Jupiter sized planet will cause the light to drop 1 or 2 % and an Earth sized planet will dim the light less than 1% of 1%).
Planets dimming a star (Jupiter-sized left, Earth-sized right) (picture from NASA)
All Kepler detections must be verified by other means, such as observing the star and detecting the amount it "wobbles" based on the orbit of the planet.
Although comparatively small the planet will still exert some gravitational pull on the star and that pull will cause the star to move back and forth a tiny bit as the planet is orbiting it. This wobble (which is actually the star moving in a circular motion) can be detected and used to calculate the mass of the planet.
The Kepler site has a great tool were you can play with this planet detecting and learn how the planets size and distance from the star is calculated. It is really cool and informative and you can find it here.