Microdata, Microformats and RDFa are new semantics introduced in HTML5. They are schematics that are included as HTML5 tag attributes and allow even greater semantic  markup. One of the benefits of this fairly recent HTML5 draft recommendation is a way of presenting your web content better to search engines, which, I would assume will have a positive impact on your SERP position, or at the very least, a much better representation of your website in it's current SERP position. A great example of Microdata.

This article brilliantly describes the nuances of HTML5 Microformats and their semantics: http://diveintohtml5.ep.io/extensibility.html

In summary an itemscope and itemtype are declared as attributes on DOM elements. itemtype references a schema. Example itemtype="http://data-vocabulary.org/Person". There currently appears to be two supported schema services.

Google provides some great examples of how to include Microdata, Microformats and RDFa in it's online documentation: http://support.google.com/webmasters/bin/answer.py?hl=en&answer=176035