Emerald

An Emerald is an item dropped when Emerald Ore is mined or more commonly obtained through Trading with Villagers. It can also be found in Desert and Jungle Temples. The occurrence of their respective ore is very limited in the world in that there are fewer emerald than diamond.

As of Snapshot 12w21a, they can be used as a form of currency in exchanging items with villagers.

Usage
As above, Emeralds are a form of currency for exchanging items with villagers. Emeralds can be traded with villagers to obtain things such as 12 wool for 2 emeralds, and vice-versa. As of 12w22a, Emeralds can also be used to craft into an Emerald block, as you can see below. The Emerald block is only used for decoration, and as a way to compact emeralds

As a Crafting Material
As of Snapshot 12w21b, the only use for Emeralds is in exchanging them for items and vice versa. It can be mined from extremely rare Emerald Ore. Emerald ore can only be found in the 'Extreme Hills' and 'Extreme Hills Edge' biomes. To be able to trade with villagers, right-click them, and then a trade shows up. To trade Emeralds with Villagers, the player must place them into the Trading Menu's left slot in the amount requested above the slot. The player can then take the resulting item from the right slot. This applies conversely to obtaining Emeralds in trade. They can not be used to be crafted into  tools. However, Emerald Blocks can be made, similar to the other ore blocks, and used as a building material or storage method. The rarity of emeralds means that this is more practical in creative mode.

History
In Indev 0.31, when Diamonds were added, they were called Emerald in the code, but was later renamed to Diamond.

On May 21, 2012, Jeb released a screenshot of himself testing the trading system. At this time, what would become Emeralds were Rubies. When the snapshot was released, Jeb announced that he might include both emeralds and rubies.

In Snapshot 12w21a, the item was changed to an Emerald. The texture for Emerald Ore remained unchanged, as Jeb forgot to commit the new texture in the Snapshot. The previous Ruby texture remains in the items.png file above the Emerald texture. Emerald was taken out of Minecraft with snapshot 12w21b, but was then brought back into Minecraft in snapshot 12w22a, with a new green ore texture.

In 12w22a, Jeb decided to keep emeralds spawning as he thought it would be a "nice surprise", although only spawned in veins of one now. Because of this, it is much more practical to obtain emeralds through trading.