Peter Suber offers a succinct definition: "Open-access (OA) literature is digital, online, free of charge, and free of most copyright and licensing restrictions" . The Budapest Open Access Initiative, a 2002 document that is a landmark in the OA movement, fleshes this out:
There are many degrees and kinds of wider and easier access to this literature. By "open access" to this literature, we mean its free availability on the public internet, permitting any users to read, download, copy, distribute, print, search, or link to the full texts of these articles, crawl them for indexing, pass them as data to software, or use them for any other lawful purpose, without financial, legal, or technical barriers other than those inseparable from gaining access to the internet itself. The only constraint on reproduction and distribution, and the only role for copyright in this domain, should be to give authors control over the integrity of their work and the right to be properly acknowledged and cited. 
Open access literature includes both peer-reviewed journal articles and author self-archived pre- and post-prints deposited in digital repositories.
WHAT ABOUT PEER REVIEW?
A common misconception among those encountering OA for the first time is that it entails anyone being able to post anything they want to the Internet. In reality, most OA journals function on a peer review model that is every bit as stringent as that of their traditional print counterparts. The "open" refers to the free availability of research to the public, not to the removal of the refereeing process that has been the basis of scholarly publishing for three centuries. Open access is in every way compatible with rigorous peer review.
ECONOMICS OF OA PUBLISHING
Shifting the Costs from Access to Dissemination
Even though most journals receive articles and labor (in the form of peer review and other activities) free of charge from scholars, there are still significant costs associated with scholarly publishing. The switch from a paper to electronic model lowers these costs, but doesn't do away with them altogether. The considerable expenses of orchestrating the publication process, and ensuring that articles remain accessible through technology maintenance and upgrades, still need to be funded.
The open access model shifts this funding from the point of access (e.g. subscription fees) to the point of dissemination . Various methods have been proposed for achieving this shift, but the most common is charging a publication fee for each article, ranging from $500 to $1500  or more.
So is OA an "Author Pays" Model?
It is not, of course, expected that scholars would pay these fees out of their own pockets. Instead, the idea is for the cost of publication to be built into grant proposals, so that the institution funding the research bears the expense. The founders of Public Library of Science--the most successful and visible OA publisher to date--argue,
The institutions that sponsor research intend for the results to be made available to the scientific community and the public. If these research sponsors also paid the essential costs of publication--amounting, by most estimates, to less than 1% of the total spent on sponsored research--we would retain a robust and competitive publishing industry and gain the benefit of universal open access. 
Many funding agencies explictly allow direct use of their grants to cover open access article-processing charges, usually $1,000-$3,000. See this list of such funding agencies, maintained by BioMed Central.
SELF-ARCHIVING: THE OTHER ROUTE TO OPEN ACCESS
OA journals are not the only way to achieve free access to scholarly literature. Even if you are publishing in a commercial journal, you may still be able make your work freely available online by depositing it in a digital repository. In fact, a strong majority of publishers allow this practice (you can check the policies of specific publishers using the SHERPA database). The University Library and CITES are working to make it easier for you to self-archive your work by launching the U of Illinois IDEALS repository.
IMPACT OF OA ARTICLES
While increased public access to research is a noble goal in and of itself, it also directly benefits scholars and serves their career goals by increasing the impact of their writing. In 2001, Nature published a letter from Steve Lawrence with the title "Free online availability substantially increases a paper's impact." In if, Lawrence outlined his findings: articles freely accessible on the public Internet are cited at a significantly higher rate than those only available via paid subscriptions . While these findings were compelling, the study was limited to the field of computer science, and was undertaken at a relatively early point in the OA movement. A more recent study, published in the September 2004 College & Research Libraries, looked at articles "in four disciplines at varying stages of adoption of open access-philosophy, political science, electrical and electronic engineering, and mathematics." It found that, in all areas, freely available articles have greater research impact, as measured by ISI Web of Science citations . So, even at this relatively early point in online publishing, there is already strong evidence that, if you make your research freely available, it will be more widely cited. Note: For other similar studies, please see "The effect of open access and downloads ('hits') on citation impact: a bibliography of studies" , a continuously updated bibliography.
HOW DO I FIND AN OPEN ACCESS JOURNAL TO PUBLISH IN, IN MY FIELD?
Most open access journals are listed in the DOAJ, the Directory of Open Access Journals. This resource may be searched, browsed alphabetically by title, or browsed by subject. As of May, 2006, over 2,200 journals were listed.
You may also use Ulrich’s Periodicals Directory, to which the U of Illinois Library subscribes, in order to find OA journals in your field. In the Advanced Search, choose the following:
- Features: “open access”
- Serial Type: “scholarly”
- Price Type: "free"
- Subject: Click on Index, and choose a subject area (if you want to browse all the journals, regardless of subject, don't do this step)
- Click on "Search", and a list will be generated by Ulrich's that not only shows which journals are open access, but also which are refereed.
In addition, many journals are offer an option for authors to pay an additional fee in order to make their article OA in an otherwise non-OA journal. Examples of such publishers are the American Physical Society, American Society of Plant Biologists, Blackwell, Cambridge University Press, Elsevier, Oxford University Press, Springer, Wiley, etc.
 Suber, Peter. " Open Access Overview."
 Budapest Open Access Initiative. 2002.
 Prosser, David C. " The Next Information Revolution - How Open Access Repositories and Journals will Transform Scholarly Communications." SPARC Europe, 2003.
 Guterman, Lila. " The Promise and Peril of Open Access." Chronicle of Higher Education, January 30, 2004 (Volume 50, Issue 21, Page A10).
 Brown, Patrick O., Michael B. Eisen, and Harold E. Varmus. " Why PLoS Became a Publisher." October 13, 2003. (Also published in PLoS Biology, Volume 1, Issue 1, October 2003.)
 Zandonella, Catherine. " The Economics of Open Access." The Scientist, August 22, 2003.
 Lawrence, Steve. " Free Online Availability Substantially Increases a Paper's Impact." Nature Web Debates.
 Antelman, Kristin. " Do Open Access Articles Have a Greater Research Impact?" College & Research Libraries, Volume 65, Issue 5, p. 372-382
 Hitchcock, Steve, et al. " The Effect of Open Access and Downloads ('Hits') on Citation Impact: a Bibliography of Studies." 2004-present.