The palantíri (‘those that watch from afar’, singular 'palantír') are the great Seeing Stones that enabled the user to see things that happened a great distance away or communicate with others. They were made by Fëanor in Aman, and seven were brought to Middle-earth from Númenor by Elendil. The Master Stone was kept inside the Tower of Avallónë upon Tol Eressëa.

Originally, three of the stones went to the north; at Tower Hills, Amon Sul, and one at Annúminas. Three were in Gondor; at Minas Anor, Minas Ithil and Orthanc. All of these stones could reply to each other, but all were open to be viewed by the chief stone at Osgiliath.

When Sauron’s forces took Minas Ithil, he captured that palantír and bent it to his will. The stones at Annúminas, Amon Sul and Osgiliath were either lost or destroyed. The Orthanc-stone was used by Saruman to communicate with Sauron before his downfall. The Anor-stone survived into the Fourth Age. The last stone at Tower Hills, the Stone of Elostirion, was taken back to the Undying Lands.
Encyclopedia entry originally written by Ringhilwen