Since their invention in the 1960s, LED's until recently have been exclusively used for only applications such as status indicators and marker lights.  These applications they were very well suited for, with long lifetimes, miniscule current consumption in comparison to their incandescent predecessors and almost total immunity to shock.  However, their low output and being available in only red, green and a few shades of yellow meant that they were not of much use for general lighting.  This all started to change in the late 1990s however, when blue LED's started to appear - allowing the companies creating them to - with some clever engineering of phosphors, create WHITE LED's.  Though we now take these utterly for granted, they marked a big milestone in the history of electric lighting.  For the first time, it was possible to create white light using a solid state source.  Equally important in more recent years have been the creation of higher power devices, making use of dice (the semiconductor "chip" that actually produces the light) many times larger than those in conventional 5mm LED's, and available in ratings of many watts.  These high output devices can provide hundreds of times more light than the conventional "old fashioned" LED shown below - and come in a huge variety of different shapes and sizes these days.

They have in the last couple of years started to gain popularity for directional and decorative lighting in addition to use in portable lighting devices like flashlights.  The ability to generate a huge variety of colours of light, ease with with the beams can be concentrated and relatively good energy efficiency all work in their favour in this field.  Directional lighting for example is an area where compact fluorescent lamps always struggle due to the diffuse nature of the source - LED's, being a point-source are far easier to focus.

In terms of actually lighting a room however, there are still a number of barriers to be overcome.  It's only really been this year (2009) that commercial products which you can plug into your existing light fitting as a direct replacement for the 100W incandescent lamp which used to be in there have really started to appear.  Rather like the Philips SL*18 when it was the at the cutting edge of the CFL revolution, these units are currently really rather pricey, and are only available from a few vendors.  Now however that the bigger manufacturers are really starting to take an interest, not least I imagine due to the restrictions recently imposed in the EU on the sale of 100W incandescent lamps, I reckon we should be in for quite an interesting show as this technology starts to really take off.

One of the main headaches as far as using LED's for general lighting, aside from the issue of actually getting enough light out of an LED itself, is the power supply.  LED's are devices which operate at low voltages but relatively high currents - and this makes building a simple and efficient power source quite complicated.  Your average fluorescent lamp for example will have in the region of 60-100V across the tube, but in the region of a few hundred mA of current flowing.  A high powered LED in contrast will in most cases have well below 10V across its terminals, but up to a couple of amps of current flowing.  This isn't really a problem of the device itself as the power dissipation itself still remains the same (formula that's relevant in this situation being P = I * V), however it's quite a bit harder to design a power supply to run from the mains voltage of a couple of hundred volts that's both cost effective and efficient.  High voltage, low current devices are rather easier to handle in that respect. 

Low powered LED devices can get away with simple capacitive ballasts due to passing only a few mA of current (such as the BELL round bulb shown below).  The higher powered lamps, such as the 3W Philips Econic model have far more complex driver circuitry.  While I've no way at this point to prove this, I reckon what must be inside there is effectively a tiny switch mode power supply - the distinctive squeal picked up by an AM radio brought close to it during operation certainly seems to support this theory.

Philips Econic 3W GU10 3000K LED.
Bell Outdoor Round Bulb LED, BC/B22 Red
Pro-Lite DioTronic GU10 LED Orange 240V 1.8W T/C