The 2006 Nobel Prize in Physiology or Medicine went to Andrew Fire and Craig Mello for work that had been published only eight years earlier, in 1998. This rapid award reflected the enormous impact of their discovery that adding double-stranded RNA to cells can alter their expression of genes that were already transcribed into messenger RNA, an effect called RNA interference, or RNAi.
Manipulating the activity of specific genes, without needing to breed new organisms with altered DNA, has proven to be an extremely powerful laboratory tool for revealing the functions of those genes. Naturally, researchers also hope they can use it medically, pulling off the equivalent of gene therapy without the risks of messing with people's DNA. This is still a work in progress, because it's not trivial to deliver a largish RNA molecule intact to the right tissues and to avoid side effects.
In addition to the promise for manipulating gene expression for research or therapy, however, researchers have begun to realize that RNAi-like phenomena are critical to gene regulation in normal organisms (as well as being disrupted in some diseases). In this case, gene expression is altered, not by RNA added to the cells, but by naturally occurring RNA transcribed from parts of the genome that don't code for proteins.
I suspect that we will look back with smug superiority at the primitive era when people thought they might explain most gene expression changes to the action of protein transcription factors. For now, though, both the understanding and the terminology of the field are evolving rapidly.
It's important to understand that RNA doesn't act alone. Instead, it joins together in complexes with proteins. In particular, proteins from one family, the Argonautes, link up with one strand of the interfering RNA in a way that lets the combination recognize messenger RNA that contains a more-or-less complementary sequence. This lets the complex selectively target the messenger RNA for a particular protein, for example, out of all of the RNA in the cell.
Different protein-RNA complexes affect their target RNA in different ways. One type of complex slices up the matching messenger RNA. By decreasing the amount of the target RNA in the cell, this reduces the rate at which protein is translated from it. In a second important mechanism, a different RNA/protein complex directly slows (or speeds) translation of the target messenger RNA, without changing how much of it there is.
Researchers are only beginning to explore the networks of molecular interactions that involve these RNA-based processes, and how these molecular patterns change during normal cellular activities and in diseases like cancer.