From Wikipedia:

The effect can be seen as drops of water are sprinkled into a pan at various times while it is heating up. Initially, as the temperature of the pan is below 100 °C (212 °F), the water just flattens out and slowly evaporates. As the temperature of the pan goes above 100 °C (212 °F), the water drops hiss on touching the pan and evaporate relatively quickly. Later, as the temperature goes past the Leidenfrost point, the Leidenfrost effect comes into play. On contact the droplets of water do not evaporate away so quickly. This time, they bunch up into small balls of water and skitter around, lasting much longer than when the temperature of the pan was much lower. This effect lasts until a much higher temperature causes any further drops of water to evaporate too quickly to cause this effect.

This works because, at temperatures above the Leidenfrost point, when water touches the hot plate, the bottom part of the water vaporizes immediately on contact. The resulting gas actually suspends the rest of the water droplet just above it, preventing any further direct contact between the liquid water and the hot plate and dramatically slowing down further heat transfer between them. This also results in the drop being able to skid around the pan on the layer of gas just under it

[via Eileen]