The blue-eyed islanders puzzle

My lecturer for Logic&Algebra mentioned this puzzle. I think I understood the inductive proof.
I quote from Wikipedia on “Common Knowledge”

“What’s most interesting about this scenario is that, for k > 1, the outsider is only telling the island citizens what they already know: that there are blue-eyed people among them. However, before this fact is announced, the fact is not common knowledge.”

I still have to make sense as to what changed when “there is someone with blue eyes” becomes a common knowledge compares to when it is not a common knowledge.

What's new

Given that there has recently been a lot of discussion on this blog about this logic puzzle, I thought I would make a dedicated post for it (and move all the previous comments to this post). The text here is adapted from an earlier web page of mine from a few years back.

The puzzle has a number of formulations, but I will use this one:

There is an island upon which a tribe resides. The tribe consists of 1000 people, with various eye colours. Yet, their religion forbids them to know their own eye color, or even to discuss the topic; thus, each resident can (and does) see the eye colors of all other residents, but has no way of discovering his or her own (there are no reflective surfaces). If a tribesperson does discover his or her own eye color, then their religion compels them to commit ritual…

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