An InformationDerivativeMarket is a market of derived securities whose payoffs are tied to outcome of real world events. If large numbers of people actively trade these securities, the prices that evolve can be used to predict the relative likelihood of the outcomes of the real world event to which the payoffs are tied.
For example, the [Iowa electronic markets] accurately predict U.S. Presidential elections. The [Hollywood market] predicts the revenue of movies better than the studios. I have heard that the futures market for orange juice predicts the weather for a county where most American oranges are grown better than the U.S. government's forecasting service.
People at http://www.hpl.hp.com/shl are working on adapting market techniques to work in small-scale situations where there are too few people to make a liquid market (e.g. a corporation trying to make sales predictions for next year). So far they have a [system] which gives very good results in the lab with about ten people when there is no public information. They are working on making it work when there is public information, and also working with Hewlett Packard to make actual predictions.
Some implementation issues include things like the moral hazard. For instance, how do you make it so that sales managers don't try to sell less than they can in order to match their own predictions if they predicted too low accidentally?
I think this is a neat take on the idea of researching better ways for human groups to make decisions.
An academic discussion paper on using TradeSports? to analyze other financial markets (specifically, using the correlation between a Saddam security in TradeSports? and indicators in other markets to analyze the amount by which those indicates were affected by predictions about Saddam): Leigh, Wolfers Zitzewitz: [What do Financial Markets Think of War in Iraq?]
note: this idea is sometimes called "information market" ([example]). I call it this because after reading a comment by Sunir, i think that term is too broad (consider a market where people bought and sold information from each other).