http://en.wikipedia.org/wiki/User-centered_design
It's a fairly simple idea. Rather than design based on our own ideas of how a user should behave, we ought to spend time getting to know the users themselves... Their tastes. Their hopes and fears. Their unmet needs. The core challenge of UCD, is that users don't necessarily know what they want. Understanding the user requires a combination of asking, watching and experimentation to uncover what a product or idea really means to the user.
In the clip below, Genevieve Bell addresses a group focused on creating location aware technologies, and highlights a number of the psychological, emotional and cultural contexts that accompany our conception of "where"-ness. Focusing on the user means understanding not only what can be done technically, but how the possibilities offered by technology are made possible (or are limited) by the human factors associated with the objects of those possibilities.
While much of the attention in UCD has been focused on technology or consumer products, the process has implications across many industry contexts.
In essence, any innovation that requires users to change their behavior, has most likely failed at creating a design that is more user-centric than it is technology-centric. On the other hand, innovations that are designed to accomodate existing user behavior, can be effective at changing user behavior - any context where changing user behavior is desirable is fertile ground for good UCD.
Below are some links that offer guidance on best practices for UCD, as well as some case studies:
Usability Professionals: What is UCD?
IDEO's David Kelley on Human Centered Design
SAP AG's 2009 UCD Initiative
Peter Merholz and Nathan Shedroff on UCD
A 7 Phase UCD Process Framework
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