Scientists from MIT and the University of Innsbruck have announced that they are able to demonstrate a working quantum computer composed only of five atoms in an ionized field. Said to be scalable easily to a larger number of atoms, this computer has been shown to compute Shor's (factorial) algorithm with 99% reliability.
The way that quantum computers work is fascinating:
In classical computing, numbers are represented by either 0s or 1s, and calculations are carried out according to an algorithm’s “instructions,” which manipulate these 0s and 1s to transform an input to an output. In contrast, quantum computing relies on atomic-scale units, or “qubits,” that can be simultaneously 0 and 1 — a state known as a superposition. In this state, a single qubit can essentially carry out two separate streams of calculations in parallel, making computations far more efficient than a classical computer.
In other words, each qubit is sort of like a "dual-core" transistor—this is a gross oversimplification of course, but perhaps it may help one to visualize how these systems work. The fact that this model has been proven to work somewhat reliably is a major breakthrough in the field, though it must be acknowledged that a commercially feasible version of this sort of computer is likely still a fairly distant dream.
The full article at MIT.edu is well worth a read, despite the alarmist rhetoric hinting at the end of encryption (faster computers will certainly also allow for new types and/or more complicated forms of encryption, after all).