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 Temples. The occurrence of their respective ore is very limited in the world.

As of Snapshot 12w21a their only use is as a form of currency in exchanging items with villagers. TETA

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' biome and the '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
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. As this item was not announced before the Snapshot was released, and Diamonds are called "emerald" in the code, most translations call Emerald "Diamond."