Anyone following the BitTorrent scene has been noticing some interesting developments lately and three new technologies in particular have stood out. A couple of them, DHT, PEX, are new ways of finding peers (users with copies of the file you want to download) without relying on the old BitTorrent tracker system. These are very important to the actual downloads but work mostly hidden from the user who may not even now when they kick in.
Magnet links, on the other hand, are a different story. They have been around for quite a few years now, yet most people have started noticing them only recently, notably since the Pirate Bay implemented them. And now that the world's first BitTorrent indexer, which relies solely on magnet links, more and more people may find themselves wondering how these links work and what are their advantages over .torrent files, which are still in wide use, if any.
For years, BitTorrent clients, trackers and indexers have relied on .torrent files to store information on the files shared with the popular p2p protocol. These files are stored by indexing sites and are used by BitTorrent clients to connect to the tracker sites. The files hold several types of data, a URL of the tracker site, names for the files it shared, as well as hash codes of files.
All of this is used by the client to connect with peers that have the files in the torrent, or portions of them, and also to ensure that the downloaded data is accurate. This system has several disadvantages, some technical, but one of the biggest is that BitTorrent indexers have to store the .torrent files on their servers, which leaves them vulnerable to legal threats if the content shared happens to be infringing despite containing no actual infringing data by themselves.
Magnet links though are just links, they have no files associated with them just data. The links are an evolving URI standard developed primarily to be used by p2p networks. They differ from URLs, for example, in that they don't hold information on the location of a resource but rather on the content of the file or files to which they link. Technically, magnet links are made up of a series of parameters containing various data in no particular order. In the case of BitTorrent, they hold the hash value of the torrent which is then used to locate copies of the files among the peers. They may also hold filename data or links to trackers used by the torrent. You can check out the entry on Wikipedia for a more detailed technical description.
With magnet links, BitTorrent indexers don't have to store any file at all, just a few snippets of data leaving the individual client apps to do all the heavy lifting. In fact, magnet links can be copy-pasted as plain text by users and shared via email, IM or any other medium. For the indexer sites, the allure is clear, using magnet links makes it harder for them to be accused of any wrong-doing in court. Theoretically, magnet links should not have any disadvantages for the users over .torrent files either. It would also potentially make downloads faster as it would enable the clients to download from peers which have identical files but with different names, for example.
In practice though, since the technology is still being actively developed, some kinks still creep up. Up until very recently, many of the major BitTorrent clients didn't support magnet links at all. After the Pirate Bay introduced them, this is no longer a problem, but there are still things to work out. Indexer sites haven't agreed on a single link format, so it’s up to the clients to support the various implementations. And for the users, the experience isn't on par with using plain .torrent files yet. For example, magnet links on the Pirate Bay don't have any additional data on the torrent other than its content so when the link is opened in uTorrent, for example, the torrent won't have a name or list the files in it.
This leads to a second problem, without knowing the contents of the torrent, uTorrent starts downloading it directly in the default location, preventing users from selecting a custom location or selecting just some files in a multiple-file torrent. These are likely to be just temporary set-backs, the recently-launched TorrIndex, the world's first magnet link-only BitTorrent indexer, is listing links which have additional information like tracker URLs and the torrent's name. And with broader support from BitTorrent clients and indexers, magnet links will eventually replace .torrent files sooner than you might expect.
Update: As of January 2012, The Pirate Bay has switched to magnet links as the default option and may use magnet links exclusively eventually. Most BitTorrent clients also support magnet links now. On February 28, 2012, The Pirate Bay started using magnet links exclusively.
Some of the most popular BitTorrent clients which support magnet links,
for Mac OS X: