Crowd sourcing is the act of outsourcing tasks, traditionally performed by an employee or contractor, to an undefined, large group of people or community (a "crowd"), through an open call. The term "crowdsourcing" is a combination of "crowd" and "outsourcing," first coined by Jeff Howe in a June 2006 Wired magazine article "The Rise of Crowdsourcing".
Photography is a good example. The advent of the digital camera, easy to use photo editing software and of course the internet have seen a surge in the availability of stock photography at a reasonable price. So the quality of photographs created by individuals started to get on par with professionals and you have a larger pool of people to choose from when you are looking for photographs for yourself of your company.
Crowdsourcing can be for design work such as 99designs.com clients can ask for submissions for designs for anything from business cards to logo design. You state what kind of design you'd like, how much you will pay, and then interested designers will start submitting designs. You choose from the designs submitted and agree to pay what they have asked for (it may be more than you offered, but the perfect logo, so you are willing to pay the higher price).
A t-shirt company, threadless, asks for submissions on t-shirt designs and the most popular (voted on by the crowd) are offered for sale in their store. If your design is chosen you get money as well as money towards buying other t-shirts and further cash rewards should it be so popular that they re-print it!
Some crowdsourcing is for the benefit of better knowledge. Wikipedia was an early example of crowdsourcing. Linux or Open Office are also examples where the user is also a contributor to making a product or application better.
Galaxy Zoo is a citizen science project that lets members of the public classify a million galaxies from the Sloan Digital Sky Survey.
Gooseberry Patch, has been using crowd-sourcing to create their community-style cookbooks since 1992.
Mechanical Turk web service allows humans to help the machines of today perform tasks they aren't suited for. Such as choosing a favourite between three photos. You sign up for the work and get paid a fee for doing it.
Of course there are benefits and casualties to crowdsourcing.
Advantages:
1. Numerous ideas from numerous people. Gets more ideas which means that you are more likely to get the best idea
2. Cheap. It cuts costs as you are employing a person, just using them for a limited time. Plus the competition that results.
3. Fast. It takes less time to get a job done as it is more likely that the right person is available now.
Disadvantages
1. Quality could be questionable. Ideas and designs are submitted now just by professionals but amateurs as well. So while they may, for example, have created a great logo, they have no idea how to make it into the format you may need. And as you don't have a relationship with the particular designer, you may not be able to find them in the future for any changes or issues.
2. It is unreliable. You may not get too many people interested and are getting ideas from a less talented pool of people.
3. Confidentiality. You are on the net for everyone to see what you are asking for, so with large corporations as an example, everyone will see you are thinking of changing your branding before you are ready to launch the idea.
Of course, for designers, photographers, crowdsourcing has been very difficult as not only do they have to compete with one another, but they have to compete with anyone who owns a computer.
Sources:
Wired.com
Crowdsourcing
Mechanical Turk
CMS Wire
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