Lightstone is a golden block that glows permanently. This block is located in The Nether usually by lava and under other blocks. If you break the block you will find lightstone dust. The dust can be crafted into a lightstone block. The lightstone block itself does prove very valuable to the game though, it’s brightness is 1 higher than torches and it does not douse when it is under water. It can be used for an under water light or natural lights in buildings.
It is being discussed on the forum that Notch may make lightstone dust a key ingredient to lanterns. Notch has mentioned that lanterns will not be easy to come by so this all makes sense in the grand scheme of things.