The Litecoin Project was conceived and created by Charles Lee with support of members in the Bitcoin community. It was pre-announced and was launched on October 13th, 2011. Based on Bitcoin's peer-to-peer protocol, Litecoin brings a number of features viewed by its development team as improvements over Bitcoin's implementation.
The main feature of Litecoin is the use of scrypt as its proof-of-work algorithm. A proof-of-work algorithm creates a computational challenge to be solved by the network of computers in order to "certify" a "block" of transactions. scrypt was developed in 2009 by Colin Percival of Tarsnap Inc., and--in contrast with Bitcoin’s SHA-256d--serves to inhibit hardware scalability by requiring a significant amount of memory when performing its calculations.
The change in proof-of-work algorithm reduces the efficiency gain and economic incentive to develop custom hardware such as Application Specific Integrated Circuits (ASIC). While ASICs can be adopted for any purpose and are likely to be introduced for Litecoin, the use of scrypt should delay this change, and preserve the decentralization in mining that brings a decentralized currency so much of its value and resiliency.
The second important feature of Litecoin is a reduced transaction confirmation time targeted at 2.5 minutes on average. Bitcoin confirms transactions every 10 minutes on average and reasonable security measures mean waiting one to two hours is often recommended. Litecoin’s faster confirmations provide end-users with faster access to their finances, especially in time-sensitive situations.