In a blind study, the researcher or the participant or both (double blind) are blind to (unaware of) the type of treatment being administered. Double-blind trials are more likely to produce objective findings. This is because the expectations of researcher and participant cannot alter the outcome. It also makes cheating more difficult. Practitioners of "complementary" medicine such as bone throwing are not too keen on blinded trials (bone throwing is not yet available on the NHS - but watch this space).
For a good example of blinding in practice see: Vioxx and a quacking duck
A few of us have been agonizing over the potential problem of "functional unblinding" in Vytorin/Zetia trials. This is where effective unblinding happens without officially opening the book of randomization codes. There are a few possible mechanisms for this including a) inspection of treatment surrogates or confounders, b) looking at data distributions, c) inspection of treatment side effects, or d) taking a sneak peek at the codes when no-one is looking. Each of these will form the subject of a later tutorial.
See here for Collated Micro-Statistics Tutorials