In cognitive therapy, the empty chair technique is a method whereby a client speaks to an empty chair as if someone or something it wished to talk to was present. Many times, the absent person is simply the person themselves; other times, it can be a person close to them, such as a relative or friend, or an abstraction close to them, such as their job or their relationship.
This technique was pioneered by Frederick Perls who, in part of Gestalt therapy, felt that creating a barrier of imagination and theater between the issue and the client would increase the dialogue and the therapeutic value of the time spent with the therapist. Since the thing in the chair was physically absent, there was no chance of retaliation or rejection. The "flow" of the therapy was very important to improvement and success of the treatment. This technique is also used in family therapy, group therapy, and marital therapy, to provide others with uninhibited and unfettered observations of other people's perceptions of issues.
In Gestalt therapy, it is important for the client to become aware of all of the sensations and interactions that take place in their daily lives, thus becoming more attuned to dealing with them in positive and acceptable ways. Thus, whenever a person is asked to use the empty chair technique, they are also encouraged to take the other side's position, pretending to be their father or wife or their hate for authority, in order to complete the feedback loop.
Often times this technique has the additional benefit of critical analysis of a situation that you cannot control. With most cognitive therapies, emphasis is on self-improvement and self-adjustment. Gestalt therapy takes into account that some things in life are not your fault, but you must still adapt to them, rather than rebel against them, or let them rule over you. This technique helps in the acceptance process.
More info on the specific psychological aspects and research on this technique can be found at www.gestalt.org.