Originally Posted by altiain
Octane is a meausre of a fuel's resistance to pre-ignition. As fuel is compressed in a cylinder by the piston, the temperature of that fuel rises pretty much directly with pressure (thanks to the Ideal Gas Law). All fuels will ignite without need of a spark once they reach a certain temperature. Ignition of the fuel in a cylinder is a very controlled event, and pre-ignition, or ignition before the spark plug actually sparks, does all kinds of nasty things to the components in your engine, in addition to decreasing the power output of each combustion cycle.
Engine manufacturers design their engine duty cycles, spark plug ignition times, spark power, compression ratio, etc., based on an expected amount of octane. If you have fuel with too low an octane rating, it can pre-ignite. This pre-ignition is basically like having uncontrolled explosives going off in your combustion chambers, which puts enormous stress on engine components.
Conversely, putting in higher than required octane doesn't actually benefit you, nor will it increase your engine's power output (unless your car's ECM can electronically advance the spark timing and measure detonation events with knock sensors). In fact, it can cause damage, because higher octance fuel is actually harder to burn, leading to more unburned fuel in the exhaust, which raises emissions, actually robs power (less complete combustion in each power cycle), and shortens catalytic converter life, among other things.