After so much hype and bashing, I have decided to create a mini-guide to LittleBigPlanet, and since fuzzysquash is the master at hype threads, I am going to crib from his format! :P
Click on any image for a full-sized picture.

I. What is it?
LittleBigPlanet is a 2D puzzle/platformer game from Media Molecule. This is Media Molecule's first official game, and was founded by former members of Lionhead (Developers behind Black & White, The Movies, and Fable, among others).
It was announced March 7, 2007 at the Game Developers Conference.It was demo'd at Sony's GDC at 11:20 AM.
YouTube video of part of the GDC Demo.
A few months later, in July 2007, more was revealed at E3.
LittleBigPlanet won Best Original Game from the Game Critics Awards, and took home quite a few nods from the media.
IGN awarded LittleBigPlanet runner up in Best Platformer, runner up for Best Art Design, winner of Best Technological Achievement, winner for Most Innovative Design, and runner up for their PS3 Game of the Show.
GameSpot gave LBP a Finalist award for Best Stage Demo, a Finalist award for Best Graphics, the Winner for Best Platformer, Winner for PS3 Game of the Show, and finally, Winner, E3 2007 Game of the Show.

II. What do you do?
LittleBigPlanet is a 2D/3D platformer where the emphasis is on problem solving and creativity. Co-operative multiplayer (Up to 4 players via local multiplayer or over PSN, or any combination of the two) has been confirmed, and players are encouraged to create and manipulate their environments (complete with dynamic physics) in order to complete the levels, including manipulating items with fully interactive physical properties (weights, materials, malleability, deformation, etc).
Along with the pre-made levels that ship with the game (created by Media Molecule using the same tools given to the players, and which can be modified as the player sees fit), the game also includes the tools for players to create their own levels and share them across the Playstation Network, where user reviews and votes will aide players in picking the best levels, in a system based around the ease and accessibility of YouTube and similar sites.

Along with the ability to create almost any object in game via the game tools, LittleBigPlanet will also allow users to take any image on their PS3 HDD and create a "sticker", which can then be placed on objects in game, thus allowing, in theory, the ability to create levels from almost any 2D platformer in the past.
Example of level creator tools in Standard Def
Example of level creator tools in High Def
Updates July 16th:
Taken from Logan832:
Anyways, the last part is the best part. Everything shown on that video, can be completely built by the player. Including the Boss fight. Can't wait to make my own bosses and throw them up on the online rating board.
Standard def Boss Battle: http://www.gametrailers.com/player/36531.html
High Def Boss Battle: http://www.gametrailers.com/player/36540.html
Also, the Sony sales talk from E3 2008 featuring LittleBigPlanet.
III. What Critics are saying
1Up had this to say in their last preview:
"At this point, everyone knows LittleBigPlanet as "that game with the cute sack-puppet characters where you make your own levels and stuff." Technically, the "game" portion is a 2D platformer with a little bit of spatial depth, and it'll ship with several premade levels. LittleBigPlanet is truly distinguished, though, by its potential for becoming a creative outlet. With its disarmingly cute ****and user-friendly tools that also offer tremendous depth, LittleBigPlanet makes imagination the only real limitation to what you can create. It's the exact opposite of the intimidating complexity of, say, building something in Unreal.'
'Given free rein to screw around with the creator tools, we could've whiled away hours...no, make that days. Not only are the tools simple to use, but many of them are also so clever that before we'd complete what we set out to make, we'd already dreamt up a handful of new ideas. We'd never have believed it back in school, but playing with geometry and physics turns out to be an absolute blast. When you start connecting objects, making something that actually goes together in a sensible way, and then dropping yourself and anyone else who wants to play into your creation...wow.'
'Don't be deceived by the characters' cuteness; you've got more than simple building blocks to play with here. In fact, creating a level's structure very much equates to setting the foundation for all the other cool things you'll want to do with your creation. We were particularly mesmerized by the environmental effects you can apply to any object: For instance, make a surface icy, and anyone who touches it for more than a few seconds turns into an ice cube and must shake the Sixaxis controller to break out -- provided they don't come to rest on the ice, in which case someone else needs to push them from the chilling surface before they freeze to death.'
'Media Molecule is looking to address any concerns potential players may have about LittleBigPlanet's appeal, from the user who just wants to play the game to the budding architect who'd rather build levels. From what we played, both activities were fun on their own. There's an undeniably fun, childlike vibe to barreling through levels with your customized character, from getting electrocuted to blocks tumbling everywhere to hopping on a skateboard to escape to the finish -- all the more fun knowing that you can make any of it yourself.'
'We feel like we hardly scratched the surface of the builder tools in our time with the game, and we can't wait to get a chance to really dig in and go nuts with them. After watching various users play LittleBigPlanet, our initial concerns about how much people who didn't care about creating levels would be interested in the game seemed unwarranted. User-created levels tap into a whole personal element above and beyond simply being "more to play with," and we figure that the better you know the creator, the stronger that connection becomes: Imagine receiving a special level from your friend wishing you a happy birthday. Since it's so easy to bang out levels, we have to wonder whether other game designers will make LittleBigPlanet levels just for fun -- publically, or perhaps as just a little secret on the side."

GameSpot, after a glowing preview, had this final thought:
"LittleBigPlanet is looking as promising as ever, and we've no doubt its take on user-generated content will be the beginning of a new trend in the games industry. Along with Spore, it's pioneering the way in which players are interacting with gameworlds. Sony is aiming to release a beta test to journalists in the coming months, and even hopes to include some of their creations on the final Blu-ray disc of the game. Expect to hear more about the game in the run-up to its planned September release date."

And finally for now, IGN had this to say:
"You're welcome -- and encouraged -- to read this preview, but the fact remains that you'll never understand the jaw-dropping power of LittleBigPlanet until you play it. How do I know this?'
'Because I just played it for the first time, and I'm legitimately floored.'
'I was in the audience at GDC 2007 when Phil Harrison introduced the world to Sackboy, and I thought LBP looked like fun but didn't go off the deep end for it. There's been more than a few events since then where LBP and I have shared the same space, but something or some project always kept me from playing it. So, my excitement for the project stayed in the "Gee, whiz. That looks like fun stage."'
'Today, at Sony's Pre-E3 event, I saw the light.'
...
'Seriously, I could talk all day about how amazing this game seems like it's going to be, but you won't know the joys of making your Sackboy hold his breath until he explodes, using the PlayStation Eye to make an in-game sticker, or any of the other cool stuff until the game's global launch in October."
IV. When can you expect it?
A private beta is set to be underway in the next month or so, with a full release of the game now scheduled for October 2008. A demo has been hinted, but has not been confirmed.

V. Media for LittleBigPlanet
Tokyo Game Show 2007, Character Creator video (Standard Def)
Tokyo Game Show 2007, Character Creator video (High Def)
CES 2008: Fire Level Demo - Actual gameplay (Standard Def)
CES 2008: Fire Level Demo - Actual gameplay (High Def)
Extended Pirate Level - Created in game via tools (Standard Def only)
CES 2008 - Extended Gameplay (Standard Def)
CES 2008 - Extended Gameplay (High Def)
SpruceCaboose
There you are.
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