Compass

Compasses were added in Seecret Friday Update 9 on September 10th, 2010. They are created by using one redstone dust and four iron ingots (see formation below). The compass needle points towards your spawn-point at all times, even in your inventory screen, chests, lying on the floor or while holding it in your hand. When the compass needle is pointing straight "up" relative to the player, the player's spawn point is straight forward. Very specifically, your spawn point is the center of the block you spawn on, while the compass points to its north-east corner.

Note: While in The Nether, the compass will spin in random directions, further suggesting that the Nether exists neither above the dome that comprises the Minecraft Sky, nor below the bedrock layer at the bottom of every map, but in a separate "plane of existence".

You don't actually have to build a compass to see which direction your spawn is in. Just place the neccesary components into their places on a crafting bench and it will point towards your spawn. This can save you some iron and redstone.

Trivia

 * The compass, along with the Clock and the Fishing Rod, is one of the few tools you can stack.