Original BLAST reference:
Altschul, S.F., Gish, W., Miller, W., Myers, E.W. & Lipman, D.J. (1990) Basic local alignment search tool. Journal of Molecular Biology 215: 403-410.
More specifically, BLAST is a "local" alignment search because it optimizes the alignment between two sequences for the most homologous regions, as opposed to trying to align the whole sequences in the most optimal way. Because of the way DNA and protein sequences evolve, this is often the best way to find evolutionarily relevant similarity between two sequences.
A convenient website to BLAST from is http://www.ncbi.nlm.nih.gov/BLAST/