Sharingan is one of three Doujutsu that belong to the ninja world. It is originally held by the members of the Uchiha Clan, that are not almost all but extinct thanks to an order given to Itachi Uchiha to wipe out his entire Clan. He only left his little brother Sasuke alive......Who in turned killed him. Making him the sole Uchiha left......except for Madara Uchiha(as far as we know it). Sharingan however, can also be transplanted into the eyes of another shinobi such as Kakashi. However we have also seen that they are capable of being transplanted into other parts of the body as well, such as the case of Danzo.
Sharingan has three stages. Tomoe stage (1-3), Mangekyou Sharingan (MS), and Eternal MS (EMS). Current MS holder is Kakashi (Would be excellent if he could somehow get ahold of Sasuke's eyes after he gets Itachi's). Current EMS holder is Tobi/Madara. Sasuke currently has the EMS planted, however is blindfolded so as to gain adjustment to his brothers eyes, with the risk of becoming blind if he removes the bandages or messes with his eyes before the process is completed. U_U
Sharingan enables the user to see the flow of chakra, capable of recognizing genjutsu and different forms of chakra, predict the movements of an opponent to dodge acurrately (most effective in Taijutsu fights)