My all time favorite TED Talk is Salman Khan on education from 2 years ago.
His book The One World Schoolhouse is also a great read. With the technology we have available to us today, there is absolutely no reason to continue with our fundamentally flawed school system.
Our current system is based on a model from Prussia, where the government mandated a standard education, and kids needed to be sorted and ranked to determine their role in society. That's why schools spend a fixed amount of time on a topic and give students varying grades. The more natural method of learning is the exact opposite of this. The grade should be fixed to "A" or mastery, and the amount of time needed to achieve this may vary among students. You should not be forced to move on to more difficult material until the prerequisites have been mastered.
With broadband internet and ubiquitous video recording, we now have the necessary tools to restructure the system. Students can spend as much time as they need watching recorded lectures at home, and the classroom becomes more interactive with students and teachers doing exercises together. Teachers can focus on giving more personalized attention where they are needed instead of repeating the same lectures. Learning through interaction with mentors and peers is so much more natural than sitting silently in a classroom jotting down notes. This is how education used to be done before the Prussian model was adopted. It was handled privately through apprenticeships or home schooling, without any government intervention. It's a reminder that sometimes the old way of doing things can provide some insight into how nature intended for things to work.
I have tried out both Khan Academy and Coursera, and I'm convinced this is the beginning of a major transformation for education. With Coursera, I had doubts about their peer grading method, only to be surprised at how evaluating other people's submissions gives you new perspectives and insights on the assignment. The amount of innovation recently in online education is very inspiring, and I am excited for future generations. People will be better educated in the future and society as a whole will benefit from that.