My buddy Jeremy just posted a cool UX pattern for placeholder text in input fields:
I like the idea of using placeholders as labels, so to solve the inherent UX problems my solution was to “slide” the placeholder to the bottom of the field when the user focuses inside of it.
You maintain the sharp appearance of your form while still supporting your users through it. See it in action and try the demo!
Source code and more information (including why non-sliding placeholders are bad UX) over at Mozmonkey.