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Heinrich Hertz, a German physicist, first observed the photoelectric effect in 1887. He observed that you could lower the minimum voltage required to produce a spark across two metal electrodes by shining UV light on them.
In 1900 Philipp Lenard, also German, showed that shining light on metal produced electrons: the same as the particles observed using cathode rays and thermionic emissions.
So What Is It?
These are the properties of the photoelectric effect:
If you shine light from a source at a fixed distance from the metal, you get a current.
The current is directly proportional to the intensity of the light at a given wavelength.
However, the energy of the electrons remains constant independent of the intensity.
If you increase the frequency of the light for a given intensity, the kinetic energy of the emitted electrons increases.
There is a well-defined threshold frequency (different for each metal) below which there will be no current.
Unfortunately This Caused a Problem....
The photoelectric effect raised many questions:
How do you explain this using the wave theory of light?
Why doesn't increasing the intensity of light make the electrons more energetic?
Why doesn't intense red light cause any electrons to be freed1?
In 1905, Einstein (in a paper that would, interestingly enough, win the Nobel Prize instead of his work on Relativity) suggested a solution. He suggested that light was quantized in particles which we now call photons, which have an energy proportional to their frequency. On hitting an electron the photon gives all of its energy to the electron. If this is enough energy, the electron gets ejected from its orbit of the nucleus, and it now has an energy related to the energy of the incident photon2.
Einstein said that the energy of a photon E is equal to constant h multiplied by the variable f (E=hf), where h is the constant that Planck postulated to avoid the ultraviolet catastrophe3, and f is the frequency of the light.
This was daring... up until then Planck's constant had only been considered as a mathematical necessity required to describe the Blackbody radiation curve... nothing more.
It is however a simple explanation for why the photoelectric effect acts in the way that it does. If the energy is related to the frequency, this explains the cut-off, when the energy of the photon is not enough to free the electron. It also explains why the kinetic energy of the electrons doesn't vary with the intensity of light.
About ten years later, Robert Andrews Millikan showed that Einstein was correct.
The energy of emitted electrons is given by E=hf-w, where w is the work function4 of the metal, or rather the amount of energy required to free an electron from the metal. If hf is less than or equal to w, then there is no current.
However There Are Still Problems...
If a photon is a particle of light, how come light can be diffracted, as in Young's double split experiment? That experiment shows light waves interfering, but how does one reconcile this to the idea of photons as particles? How can a particle interfere with itself?
These questions led to the idea of Wave-particle duality.
Using the photovoltaic effect (a special case of the photoelectric effect), that is generating a current by irradiating two dissimilar semiconducting materials, which have different conductivity properties, with light, it is possible to convert solar energy into electricity efficiently. This is a clean, cheap to maintain energy source, since it does not require the burning of fossil fuels, and has no moving parts to get broken.
Although currently it is more expensive than more traditional forms of energy generation, it is getting cheaper, and is being viewed as a necessary next step for when the worlds reserves of fossil fuel run out.
Also using the photoelectric effect, it is possible to detect minute amounts of light by amplifying a photoelectric current. Photomultipliers are used to detect interaction between Neutrinos and protons, a currently important area of research in Quantum physics.