Inception is a tool for breaking into computers with full-disk encryption. It assumes that you have access to a suspended/screen-locked computer whose disk is encrypted. You access the machine over its FireWire interface (or, if it doesn't have FireWire, you plug a FireWire card into one of its slots, and the machine will automatically fetch, install and configure the drivers, even if it's asleep), and then use the FireWire drivers to directly access system memory, and from there, patch the password-checking routine and walk straight into the computer.
This (and its predecessors, like winlockpwn) is a substantial advance on previous attacks against sleeping full-disk encrypted systems, which involved things like plunging the RAM into a bath of liquid nitrogen. As the author, Carsten Maartmann-Moe, points out, this can't be easily remedied with a FireWire driver update, since FireWire requires direct memory access to effect high-speed transfers.
So, two things: First, shut down your computer when it's not in your possession; second, "Inception" is an inspired name for an attack that breaks into the dreams of a sleeping computer, directly accesses its memory, and causes it to spill its secrets.
Inception's main mode works as follows: By presenting a Serial Bus Protocol 2 (SBP-2) unit directory to the victim machine over the IEEE1394 FireWire interface, the victim operating system thinks that a SBP-2 device has connected to the FireWire port. Since SBP-2 devices utilize Direct Memory Access (DMA) for fast, large bulk data transfers (e.g., FireWire hard drives and digital camcorders), the victim lowers its shields and enables DMA for the device. The tool now has full read/write access to the lower 4GB of RAM on the victim. Once DMA is granted, the tool proceeds to search through available memory pages for signatures at certain offsets in the operating system's password authentication modules. Once found, the tool short circuits the code that is triggered if an incorrect password is entered.
An analogy for this operation is planting an idea into the memory of the machine; the idea that every password is correct. In other words, the nerdy equivalent of a memory inception.
After running the tool you should be able to log into the victim machine using any password.