This was taken from my page on Quantum mechanics. See also my page on the EPR paradox.
Another consequence of the exclusion principle is the phenomenon of quantum entanglement. This is when physical information in one place can seemingly be transferred to another place instantaneously. Two quantum particles can be correlated that the action of one will affect the behavior of the other. Albert Einstein referred to this phenomenon as "spooky action at a distance." Particles may initially be acting independent from one another, however, upon interacting may become entangled. This means that even after they are separated, measurements on one particle, will affect the other entangled particle instantly. These entangled particles operate as one.
History
The couterituitive predictions of quantum theory for strongly correlated systems was first discussed in 1935 in a joint paper by Albert Einstein, Boris Podolsky and Nathan Rosen. These three formulated the EPR paradox. This was a thought experiment that attempted to show the incompletness of quantum theory. They said, "We are thus forced to conclude that the quantum-mechanical description of physical reality given by wave functions is not complete. "
These three scientists, did not however, coin the term entanglement. They also did not generalize the special properties of the state they were considering. Following the EPR paper, Erwin Schrodinger wrote a letter to Albert Einstein in German, where he used the word Verschrankung, which translates to entanglement. This is to describe the two particles that interact and then separate, as in the EPR experiment. Schrodinger, will not long after, publish a paper defining and discussing the notion of entanglement. In the paper, he recognized the importance of the concept.