I've written this a bunch a times in replying to people's questions about lcds, so I'm gonna post some info here for people to refer to:
Basically, what emericanchaos posted in 2003 remains true, so I'll just briefly summarize and update:
First off, all lcds today are active matrix, we've moved well past the passive lcd generation.
Contrast Ratio - The higher the better. Shows how much of a "contrast" the lcd can pump out between the darkest black and the whitest white. Bigger means more accurate color reproduction, more vibrance, etc. beware of dynamic contrast ratio as these are greatly exaggerated and don't really give you an accurate idea. Try to find real contrast ratio online or in reviews
Brightness - this one doesn't really get talked about anymore since most lcds manufacturers usually have 300-400 nits (cd/m2) of brightness. It used to be important because cheap lcds back in the day couldn't overpower office building lights, leading to horrible image rendering and image quality. Anything over 400 is great, but it's not going to be beneficial unless you plan to shine a 1000w halogen lamp directly towards your monitor.
Response Time - faster the better, but again, not much of an issue these days unless you are a gamer. Averages these days are usually in the single digits (<10ms)
Dot Pitch - not much of an issue these days unless you're up in the 27"+ size but still stuck at a 1920x1200 or lower native resolution. as usual, look for the smallest ones, as these will give you less blotchy text (or other small shapes that need high resolution)
With that said, let's get into the most important aspects of purchasing an lcd these days: size, color accuracy, and response time.
Size
I would say size must be the first consideration, since LCDs generally are well built and most people stick with their purchase for years. Whatever you do, don't go too big, or you will regret it.
My boss got a nice bonus one year and decided to spend it on a shiny new dell 30" lcd. He put it on his desk and had to turn his head constantly to see everything. Imagine watching a movie from the front row. Now imagine having to do that from 9-5 each day. That's why you don't want to go too big.
With prices what they are today, I would say the sweet spot is a 24" monitor for all around use desktop use. Word documents displayed in full screen are actual sized, which is real helpful if you do any type of design work like i do. Desktop space is plentiful for having multiple windows open without it feeling like you're being cramped or wasting space. Games are immersive, and you don't have to turn your head back and forth like my idiot boss to follow the action. If you split the time between desktop use and multimedia usage (watching movies, etc) then you can go bigger. There's not much need to go smaller than 24" unless you're on a real tight budget.
Color Reproduction and Response Times
Before differentiating the color differences between types of LCDs, I will say the average user sitting in front of their LCD will not really notice a huge difference between the panel types. It only becomes important based on your specific needs and usage.
TN - Cheapest, most prevalent type of panel. This has the worst color accuracy, for two reasons. One, it displays the 16.7m colors not using the full 8-bits per color but by dithering 6+2 bits. What that means is instead of showing true periwinkle blue, it will show one blue pixel next to a yellow pixel and let your eyes fool you. This is why TN panels have the lowest gamut (color space) in comparison to PVA/MVA and IPS panels. Also, the viewing angles on TN panels are the worst in comparision to the other types. The further you move away from the direct center of view (up, down, left, right), the worse the colors get until the screen becomes unviewable. However, the one redeeming quality of TN panels are that they have the fastest response times (4 or 2ms G-to-G). If gaming is what you do, then a TN is for you.
S-PVA, S-MVA - More expensive than TNs but less so than S-IPS panels. These display much better color accuracy and have a higher gamut due to using true 8 bit color to display 16.7 m colors. If you want to get nitpicky, S-MVA is better than S-PVA, although it is less common and slightly more expensive. These types of monitors also have great viewing angles, so are perfect for collaborative design work, or just having friends over to watch a movie.
The reason why S-PVA/MVA panels haven't pushed TN panels off the market is because they have slower response times (16ms-8ms), and some people even report noticeable input lag (like in Samsung's 215TW). Thus, most gamers tend to stay away from S-PVA/MVA panels. On the other hand, if you're not a hardcore gamer, watch a lot of movies or do graphics work, these types of LCDs are perfect.
S-IPS - The absolute best and absolute most expensive LCD panel type of the three. It combines the fast response of TN panels with the color accuracy and viewing angles of PVA panels. Of course, these will cost you an arm and a leg. These types of panels are really for the money-is-no-object crowd and for professionals. For example, if two doctors are looking at a digital slide for colon cancer, you sure as hell want them to see the same color and display the accurate color regardless of where they're standing. Other than that, not much need for an IPS panel for the everyday user.
Well that turned out to be a much longer post than expected. Finally, with all the knowledge you have now, how do you go about finding out what type of panel the LCD you're itching to buy is? The easiest way is to visit tftcentral.co.uk and search for the panel type based on the model. They have a large database and got good reviews of popular monitors as well. If the database doesn't have it listed, you can go by these specs to help you out:
If it's cheap, got a <4ms response time, and the vertical viewing angle is less than 178 degrees, it's most likely a TN
If it's relatively expensive, and has 178 degree viewing angles for both vertical and horizontal, it most likely is a S-PVA
If its ridiculously expensive, has 178 degree viewing angles for horizontal and vertical and has a low response time, you're either getting scammed or getting an IPS panel