A class of neutron star officially known as Soft Gamma-Ray Bursters (catalog designation SGR) are called magnetars due to the recently confirmed theories of Christopher Thompson, which indicate that they have staggeringly huge magnetic fields on the order of 10^15 Gauss. To put this number in perspective, it impossible to build a magnet on Earth with a magnetic field greater than 4 x 10^5 Gauss because after that, the magnetic forces exceed the tensile strength of most suitable materials. A magnetar's magnetic field is 10 billion times more intense than that and could theoretically erase floppy disks and attract ferromagnets from a distance greater than that from the Earth to the Moon.
SGRs were first detected in the mid 1970's by gamma-ray detecting satellites designed to enforce nuclear test-ban treaties but were not originally distinguished from "classic" gamma ray bursts. In 1979, it was noticed a particular point (designated SGR 1806-20) emitted more than one burst (thus, the "repeating"). A second SGR (SGR 0526-66) was discovered on March 5th when it emitted the most intense extra-solar gamma ray event ever recorded. This burst was so intense that it pegged every gamma ray detector needle in existence and ionized the upper atmosphere to an extent that rivaled the sun. Scientists were shocked a year later when they traced the source back to a supernova remnant in the Large Magellanic Cloud (SNR N49) over 40,000 light-years away.
Neutron stars are believed to form during a supernova when the core of the dying star overcomes the electron degeneracy pressure and crushes everything into a ball of neutrons. As the core collapses, it spins faster (insert canonical figure skater analogy here). If the core spins fast enough , it will develop a magnetic field of a mere 10^12 Gauss and become a pulsar. However, if it doesn't spin fast enough, convection currents within the super-hot, superfluidic neutron fluid (containing the odd proton and electron, of course) will cause a dynamo effect, converting much of the star's angular momentum into a colossal magnetic field from 10^14 to 10^16 Gauss. These magnetars rotate "slowly," with a rotational period on the order of tens of seconds, as opposed to milliseconds for a pulsar.
But what about the gamma ray bursts? Well, a neutron star cools and solidifies in about 20 seconds, forming solid crust containing some iron and having properties very much like a dense metal. Over the course of the next 10,000 years, however, this crust will be heavily stressed and occasionally rent by the intense magnetic fields, causing a starquake. During these tremors, large amounts of magnetic energy are liberated and radiated away as hard x-rays and soft gamma rays.
Magnetars are believed to be fairly common, but share with other neutron stars and black holes a singularly low profile that makes them difficult to detect. The only observable magentars are SGRs, which, due to the extraordinary circumstances of neutron star formation and the vanishingly short active time frame, are, while eminently detectable, among the rarest objects in existence. To date, after 24 years of constant observation, there are only five in the catalogs, and one of them is not confirmed.
For great info, see http://solomon.as.utexas.edu/~duncan/magnetar.html