In 1867 the Royal Society of Arts
erected a plaque
on a London
house where Lord Byron
had been born. This was the first of a scheme that continues actively to this day, and there are now some 800 Blue Plaques in London. The scheme has recently been extended to Liverpool
and its Merseyside region, and is being gradually rolled out to other regions of England. Today it is administered by English Heritage
The standard form is an enamelled plaque of middle blue, about 50 cm across, with a white inscription giving the person's name, their life dates, one or several words indicating their profession and importance, and perhaps the years they lived there. The first few were blue, then in the early years they were brown, becoming blue again in 1937. Not all are conferred by the official body, since local councils and private societies have also taken up the idea of commemorative plaques. Some of the less official ones are rectangular.
The RSA handed over the scheme to the London County Council in 1901; they became Greater London in 1965; and responsibility passed to the conservation organisation English Heritage in 1986 with the winding-up of the GLC. The Byron house in Holles Street no longer survives, and the earliest of the remaining 13 RSA plaques out of an original 36 are from 1875, to John Dryden and Napoleon III. The LCC put up 249 and the GLC 262.
The main Blue Plaques scheme went national in 2000 with the first Merseyside plaques including the home of John Lennon at 251 Menlove Avenue, Liverpool. Nominations are now being taken for Birmingham, Portsmouth, Southampton, and the East of England.
The person commemorated must be famous, and dead, and the house must be significantly associated with them. English Heritage regulations now go into detail about these conditions. They must have been dead for 20 years or born 100 years ago; they must be generally recognised as important by their profession, or if foreign they must be of international importance and likely to be recognisable to a well-read member of the general public.
The house or building marked must be the original one: they no longer issue plaques saying "on this spot" for things like birthplaces. However, the locations of former important buildings are sometimes marked, such as where once stood Bedlam Hospital or Newgate. A person is not to be commemorated everywhere they lived: a maximum of two plaques nationwide is allowed now. Occasionally a workplace is important, such as the Faber and Faber office where T.S. Eliot was an editor. I get the impressions all these regulations have been tightened up a bit: there's a house in Highgate where Charles Dickens spent a few months, but that was not at all significant in his life, and he has other better-deserving locations across London.
Areas like Bloomsbury, Hampstead, Chelsea, and Kensington, long-standing haunts of artists and politicians, naturally have a high population of Blue Plaques, and often you get scatterings of them across nearby buildings, or side by side as with the Mayfair houses of George Frideric Handel and Jimi Hendrix. A few buildings even have two plaques, such as the Highgate house of Samuel Taylor Coleridge and J.B. Priestley (though the first of those is not in standard format).
English Heritage official site (URL too long, use search):