Participants preselect designated representatives, called "delegates". These can be changed at any time. Then, whenever an issue comes up for a vote, each individual has the choice to vote directly. But if they don't vote directly — because they don't have the time, feel qualified, or any other reason — their delegate gets an extra vote on their behalf.
These additional votes can be passed transitively. Thus, if 5 people delegate to Alice, who's delegated to Bob, and neither Bob nor his 5 constituents choose to vote, Alice could vote for all 7 of them.
This system has the property that it can recreate the expert-driven ideal of elected representative democracy, while simultaneously allowing direct participation for individuals that want to be more involved.
Google Votes: A Liquid Democracy Experimenton a Corporate Social Network
Steve Hardt, Lia C. R. Lopes
Liquid Democracy: True Democracy for the 21st Century
The Internet Party: How technology can disrupt politics and re-invent government
The Liquid Blog