The Redstone Torch is an item which is used as a power source for wires and as a result can be used to sabotage/activate traps and mechanisms as well as opening locked iron doors making it useful for raiding parties in multiplayer. A door that is designed to open when not powered and constantly powered prevents this vulnerability. Wires in turn are used to operate a Stone Button, a Lever, or a Pressure Plate from a distance. It turns off when any adjacent switch, lever, or pressure plate is turned on. The torch can only power the wire for a length of 15 blocks.
The Redstone Torch will constantly power a set of wires, and is used as a "block-based" switch sometimes. Using it as a source of light is not recommended because it has just half the light output than a regular (coal) torch, and this light amount will not prevent mobs from spawning (though it WILL severly decrease the probablity of that happening). Also, redstone is much harder to find than coal, and is made into torches at a 1:1 ratio (rather than 1:4).
See Redstone circuits for more information on using Redstone torches in circuits and logic gates.