Mastercoin is both a new type of currency (MSC) and a platform. It is a new protocol layer running on top of bitcoin like HTTP runs on top of TCP/IP. Its purpose is to build upon the core Bitcoin protocol and add new features, with a focus on a straight-forward easy to understand implementation which allow for protocol and analysis and its rapid development. Many of the functionalities are theoretical at this point (and ripple has first-mover advantage), but Mastercoin's definitely worth watching.
MasterCoin (MSC) Features
Technology Specifics for MasterCoin (MSC)
MasterCoin (MSC) uses the Scrypt algorithm and relies on the PoW proof type.