What are buyer personas?
Buyer personas are essentially a specific group of potential customers, an archetypal person whom you want your marketing to reach.
Optimizing your site for buyer personas gets you away from an egotistical point of view and gets you to talk to users about their needs and wants. What people care about are themselves and answers to their problems, which is why buyer personas are so critical for marketing success.
Why use them?
Essentially it's about knowing who you are selling to, what is their situation, what are they thinking, their needs and hesitations. If you'd know the exact person you're selling to and the problems they have, you'd be in a much better position to sell them. RightNow Technologies increased their conversions 4x by building a persona focused site.
How to build them?
The truth is that most companies have only the faintest idea what lies behind the buying decision. We presume an awful lot. The buyer persona is a tool that can help you see deeper into the buyer's thinking.
Use interviews with existing customers to map out different personas. To get more information on this read The Buyer Persona Manifesto (free pdf). Here's a free webinar recording on buyer personas I recommend checking out.