AKA the 'be like'.
In linguistics a quotative is any linguistic marker that indicates that the speaker is reporting speech that was originally spoken by another. The most widely accepted quotative in English is 'said', as in "he said 'wow!'"
There's a new quotative making the rounds. In recent decades the word 'like' is has taken the place of 'said', to the point where many of us use the quotative like the majority of the time, using 'said' only in special cases. It is most often used in the form 'to be' + 'like' (e.g., "was like"), and was in the past strongly associated with valley girl speech patterns -- but no longer! Young people the English-speaking world over are using the quotative like, and most of the elders among us are using it at times as well.
"I told him we were going out tonight, and he was like'well, I'm not going', and I told him he'd better, and he was like 'whatever'. So if he argues, I'll be like, 'I told you you're coming!'"
It is not the place of the linguist to judge, only to report. One thing that the linguists report is that this use of the quotative like has spread quickly across the globe, to the point that it is common in all English-speaking countries. It is hypothesized that 'like' may be preferred over 'said' in part because 'like' implies imprecision. When we use 'like' it is understood that we are not trying to quote word for word; we are telling the listener what the speaker intended, not what they actually said. On the level of most day to day conversation, specific quotes would be redundant; whole conversations can be condensed to quick sound bites explaining what the conversation was 'like'.
It is important to recognize that 'like' appears in other contexts besides the quotative. Obviously, it has its traditional dictionary meanings, but it also functions as a vocal filler or hesitation noise, as in "I, like, don't know, it's like, all messed up." Note that those are not quotative likes! Those are performing the same function as 'um' or 'ah'. 'Like' can also be used as a hedge, indicating that the words used may not be quite true: "it was like, the biggest spider in the world!". while these other uses of like are often still considered to be dialectical variations, the quotative like is quickly becoming standard English usage.
The introduction of quotatives is nothing new. We all understand this sentence: "She goes to me, 'what are you doing with that?', and I'm all 'what business is it of yours?'" It is a bit of a mystery why 'like' took over the world, while other quotatives remain comparatively localized. The spread of 'like' from America isn't too puzzling, as American pop music, American movies, and American internet users have inundated the civilized world with their language. But it is still a mystery why 'like' was the chosen quotative in the first place.
Regardless of where it came from, it is likely here to stay. It is commonly used in America, Canada, the UK, Ireland, Australia, New Zealand, Singapore, South Africa, and Ghana, among others, and it is starting to enter into written language as well. It has also started to creep into our dictionaries; both The American Heritage Dictionary of the English Language and Merriam-Webster's Collegiate Dictionary include it, albeit noting that it is an 'informal usage'. I suspect that if you pay close attention, you will find that you are already using it yourself...
References:
http://www.pbs.org/speak/words/sezwho/like/
http://en.wikipedia.org/wiki/Like#As_a_quotative
http://www.nytimes.com/2007/07/15/opinion/15iht-edoconnor.1.6661788.html
http://dsc.discovery.com/news/2008/01/22/im-language.html
Class notes.