The palantíri were crystal balls of a sort, which could be used to see things from afar or to communicate between great distances. It was Elendil who brought them from Númenor, and him and his heirs were appointed rightful owner. According to Gandalf's account it seems it was also able to also see through time, to look at remote past.
There were total seven palantíri; they were just peer-to-peer stone except one at Osgiliath and the other at Amon Sûl, which could see every other stones. Smaller ones were about one foot in diameter, while the `master' stones were much larger, it is told.
In the Lord of the Rings three palantíri appear; one with Saruman, one with Sauron, and the last with Denethor.