According to this year's poll, the kanji chosen to represent 2012 is the character that means 'gold'. The same kanji was chosen in 2011. The reasons for this year's choice are many, but they include the awarding of a Nobel prize to a Japanese scientist, natural events like an eclipse of the sun, and big international events like the London Olympics at which Japan won several gold medals. The second choice was 'ring' which probably again referred to the Olympics; the third, 'islands' may have been more negative as it probably refers to ongoing disputes over territory that Japan is involved in.
The idea of choosing a kanji to sum up a year was created in 1995 by the Japanese Kanji Proficiency Society. It is very popular and the vote results are announced in a special ceremony every December.
You can view an image of the winning kanji, and find out more about the ceremony, here.