Something that happens to chocolate to cause slight whitish discoloration to appear on the surface.
Blooming can occur in one of two ways: fat bloom or sugar bloom.
Fat bloom is a situation that results when the chocolate has been stored at a high temperature (70°F/20°C) for a period of time. During this time the temperature will cause the cocoa butter to separate from the rest of the crystallized chocolate mixture and rise to the surface. At the surface the cocoa butter recrystallizes forming the white discoloration. Fat bloom can be distinguished as it will feel slightly oily and will melt upon contact with your hand. It also tends to be accompanied by small cracks that cause the chocolate to look relatively dull in appearance.
Sugar bloom looks the same as fat bloom, but is created in a slightly different manner. Sugar bloom arises when there is too much humidity. This causes condensation on the surface of the chocolate that dissolves sugar particles. When the temperature rises again and evaporation occurs the sugar crystals are left on the surface. Sugar bloom can occur when a chilled piece of chocolate is brought into a warmer environment causing it to "sweat" as this liquid will quickly evaporate. Sugar bloom is distinguished from fat bloom by a grainy feel.
Since white chocolate does not contain any chocolate solids, merely cocoa butter, milk solids, and sugar it is immune to blooming.
Both forms of blooming come from improperly storing chocolate. Always keep it tightly wrapped and in a cool place. A cool place, however, does not mean the refrigerator. This will cause the chocolate to easily experience sugar bloom due to the increased humidity and rapid change in temperature.
Despite the looks there is nothing at all harmful about eating bloomed chocolate. After all, it is merely portions of the chocolate coming to the surface and recrystallizing. I've eaten plenty of it that was deemed unsightly and hence "damaged" while employed by Godiva one summer with absolutely no ill effects.