The Sharingan is a special type of pupil condition that naturally occurs in all members of the Uchiha clan, though not all of them gain the ability to use it. Itachi hints at some dark ultimate purpose behind the Sharingan, which both he and Sasuke apparently know, but the series has yet to reveal exactly what that purpose is. The Sharingan is thought to be descended from the Byakugan, but grants the user different abilities and a different insight.
The Sharingan's first and most well known ability is to memorize any technique that it witnesses. It can memorize ninjutsu, genjutsu, and taijutsu with perfect accuracy, allowing the user to use the techniques as his own. In order to reproduce copied jutsu, however, one must have the necessary skill or ability to perform them. A prime example is Rock Lee's Strong Fist taijutsu. While Sasuke was able to copy some of Lee's moves, they put a much more significant strain on him since he hasn't trained nearly as hard as Lee has. In addition to physical skill, the Sharingan cannot allow the user to reproduce other kekkei genkai since the Sharingan user doesn't possess the same genetic trait. Additionally, Sharingan users cannot summon a creature which they have not made a contract with.
The Sharingan also grants the user incredible clarity of perception, allowing them to track fast-moving objects with ease and even predict the subsequent movements of those objects. The ability to track and predict movement is largely based on individual skill, as unskilled users have much more trouble tracking fast-moving objects. A fully-evolved Sharingan eye can track all but the quickest opponents, even if the user can't move at the same speed. This perception is also great enough to see through genjutsu, depending upon the skill of the user, and the ability to observe the movement and flow of chakra, but not to the same extent or clarity as the Byakugan. Additionally, the Sharingan grants the user exceptional analytical powers, allowing them to instinctively pick up on various visual clues with little difficulty. In one instance, Kakashi had to shut his eyes to avoid accidentally reading Naruto's lip movements while he was spoiling the ending of one of Kakashi's Icha Icha books. Sasuke was also able to reproduce answers on another person's test by watching their pencil movements during the Chunin Exam.
Finally, the Sharingan is capable of a unique brand of hypnosis that involves suggesting actions and thoughts to the opponent. When used in conjunction with the other aspects of the Sharingan, this allows the user to perfectly mimic every move their opponent makes, even before they do, making it appear as if the user can see the future.
The Sharingan does not automatically appear from birth in a user; instead, it will usually appear when the user is in a life-threatening situation, where the power of the Sharingan could save the user. After this first appearance, the user can then call up the Sharingan any time he or she pleases. (Due to its unique nature, Kakashi's Sharingan cannot be deactivated, and thus he usually covers it to conserve chakra.) The power of the Sharingan is judged through the number of tomoe in the eye, known as the "tomoe seal". It is not unheard of for a Sharingan user to have different amounts of tomoe in each eye. For example, Sasuke's Sharingan initially had two tomoe in one eye and one in the other. Upon his first regular activation of it, it had evolved to two tomoe in each eye. He evolved it to three in each eye during his battle with Naruto at the Valley of the End. A fully-matured Sharingan has three tomoe in each eye.
It is possible to transplant Sharingan eyes from one person to another, as occurred with Kakashi and his deceased comrade Obito Uchiha. However, transplanted eyes do not work as well in a non-Uchiha body, causing more strain on the user, as is the case with Kakashi – extended use of his Sharingan will cause him to collapse. Uchiha clan members are not burdened with this weakness; while activation of the Sharingan does consume chakra, the drain is so small as to be almost insignificant. Itachi in particular seems to have no trouble keeping his Sharingan activated near-constantly.
Characters who currently possess the Sharingan include Sasuke Uchiha, Itachi Uchiha, and Kakashi Hatake. Kakashi's eye was given to him by Obito Uchiha, one of his teammates in his original three-man ninja team. Obito developed it in a battle against a camouflaging Rock shinobi. During this battle, Kakashi lost his left eye when he was attacked, hence his scar. Near the end of the battle, Obito's right side was crushed under a giant rock, and as his last act Obito had Rin, a medical ninja, remove his left eye and implant it in Kakashi's empty eye socket, thus allowing Kakashi to use the Sharingan even though he does not have Uchiha blood. This is also why only his left eye is a Sharingan eye.
The Mangekyo Sharingan is a heightened form of Sharingan. The Mangekyo Sharingan is distinguished from a normal Sharingan through its appearance, which changes the form of the tomoe seal. However, unlike the Sharingan, it may have a different appearance between the users, as Kakashi's version is significantly different than Itachi's. Those who have the potential to obtain it must make a great sacrifice in order to obtain it—according to Itachi, they must kill their closest friend. Itachi does in fact do this to obtain his version, but Kakashi has noted that everyone he cared about had died long before the start of the series, so how he developed his own variant is unknown. It has also been implied in the manga that use of the Mangekyo Sharingan may deteriorate the user's normal eyesight.
In the long history of the Uchiha clan, only a few have been able to obtain the Mangekyo Sharingan. At present, there are only two people who can use the Mangekyo Sharingan, Itachi being one and Kakashi being the other. According to Itachi, if his younger brother Sasuke obtained it, the number of people who could handle the Mangekyo Sharingan (including himself) would be three. Itachi's statement may suggest that there is (or was at that time) another Mangekyo Sharingan user somewhere; however, Itachi uses the verb atsukau which means "to handle" or "to deal with", which could also mean that there are only three people left who are capable of acquiring the Mangekyo Sharingan. Given that Itachi had just killed every other member of the Uchiha clan, this statement could simply be taken as a matter of fact: Kakashi, Sasuke, and Itachi were the only known characters left alive with Sharingan eyes, so no one else had the potential to obtain it.
Itachi's Mangekyo Sharingan:
Itachi Uchiha gained the Mangekyo Sharingan by killing his best friend, Shisui Uchiha. With the Mangekyo Sharingan, Itachi is able to use the two most powerful jutsu of the Uchiha clan, Tsukuyomi, a genjutsu of unrivaled power and effectiveness, and Amaterasu, a ninjutsu capable of burning through even the strongest of materials.
Kakashi's Mangekyo Sharingan:
Kakashi Hatake developed his own version of the Mangekyo Sharingan during the timeskip. Unlike Itachi's version, which is used to destroy a target, Kakashi uses his to create a localized interdimensional space-time warp, allowing him to target any object and send it to another dimension, achieving the same result. Kakashi used this new jutsu to warp a segment of Deidara's right arm into a different dimension. He immediately aimed at Deidara's head for a second attack, but missed. He subsequently uses it again in Chapter 278 to counter Deidara's ultimate move, which would otherwise level the entire forest they were fighting in. The attack requires considerable effort to aim precisely and appears to leave Kakashi's chakra significantly drained; he collapses after using the technique three times (compared to his other original move, Lightning Blade, which he can use four times a day).
The appearance of the pupil and tomoe in Kakashi's Mangekyo Sharingan differ from that of Itachi's; Kakashi's looks more like a pinwheel. Before this was shown, it was thought that one had to kill their best friend to acquire the Mangekyo Sharingan. This clearly isn't the case with Kakashi, who stated long before developing his Mangekyo Sharingan that everyone close to him was already dead. The only known now-deceased person that could be described as his "closest friend" was Obito, who died shortly after giving Kakashi his Sharingan eye. While Kakashi may have felt responsible for Obito's death at the time, he certainly didn't kill Obito himself, and it wouldn't explain why it took him so many years to obtain the Mangekyo Sharingan. Thus, the means behind its development and the actual meaning of the "requirement" are currently unknown.