Iron Bars

Iron bars are blocks that occurs naturally in strongholds and in NPC Villages. They serve a similar purpose to fences but are 1 block high instead of 1.5 blocks high. When placed without anything on its sides, they will appear in the shape of a from the top, but when something is placed next to it, it will become flat,  shaped, or  shaped, depending on the items surrounding it.

The iron bars can be placed in much the same way as fences or glass panes.

Uses
Iron bars can be used to create arrow slits when placed between a door and a solid block. This creates a small gap between the door and the iron bars which mobs can see through, and which arrows can be shot out of. They can also be used as windows in the Nether. Since they have a high blast resistance, they are the best choice to make ghast-proof windows. Another thing to note about iron bars is that torches and blocks cannot be placed on the top of them.

History
On July 11th 2011, Notch revealed two new screenshots of a stronghold (in two different brightness settings) where the bars can be clearly seen alongside other common stronghold blocks. The lighting differences have been explained a bit (though not necessarily completely correct) by a user on the forums.

Trivia

 * A 2x2 area made of the iron bars can make a hole big enough for the player to fit through, but not rain, water, etc. this can be used as an easy entrance for an underwater house, and even an exit if pistons are used. Glass panes work in the same way.
 * Iron bars will not connect to glass panes, when laid next to each other they will create an illusion of a 1 block area where a player is easily able to fall, jump, or walk into while still blocking rain, water, etc. It is also useful to lay a painting over this area.
 * If a sign or a painting is placed on the iron bars, it appears to float in the air.
 * Iron bars have the same placement rules as glass panes. When iron bars are placed singly it forms a cross shape, similar to how glass panes do.
 * Since iron bars are not destroyed by a Ghast's fireball, and since they block a Ghast's line of sight, they can be used as "Ghast-proof" walls for small enclosed roads through the Nether.
 * Iron bars also prevent fire from spreading, i.e. surrounding a fire with iron bars will prevent wooden items from being lit aflame.
 * Despite apparently being thin enough to do so, iron bars do not let a ghast's explosion touch the block beneath them as long as the block is protected from other angles of the explosion affecting it. This, in theory, means you should be able to use iron bars and sticky pistons to make openable/closable shutters.
 * If an iron bar is connected to a block and a rail is placed on the block, the top texture of the iron bar disappears.
 * If placed on top of a single cactus, only the corners can damage.
 * Like glass, iron bars block the vision of mobs, except Spiders and Cave Spiders.
 * The player cannot shoot arrows through iron bars. Therefore they can't be used to cover arrow slits. This is because iron bars are considered a full block when connected to another one, similar to glass panes.
 * If the player builds a 3x3x3 block out of iron bars encasing a TNT block, only the iron bars will be destroyed.