In her latest entry on the Customer Experience Crossroads blog, Susan Abbott writes about ethnography. Ethnographic market research differs from such typical methods as conducting surveys, focus groups, and one-on-one interviews. With these other methods, you don't study the prospective users and buyers of your product in their natural environment.
When you employ ethnographic research methods, you observe (and sometimes interact with) your subjects in their natural environment. In a previous entry, I linked to an interesting example of ethnographic market research.