Researchers theorize that billions of years ago, when the Alpha Centauri System were condensing from the primordial stellar nebula, a Mars-sized stellar body may have crashed into the still molten Pandora. The moon's nickel-iron core was disrupted. The high temperatures and pressures produced far exceeded anything wrought by Human technology. These forces interacted with Polyphemus' intense field and created conditions suitable for the formation of Unobtanium.
When the world's first low-temperature superconductor was created in the late twentieth century, it proved to be useless because of inherent instabilities. Further efforts proved futile, and researchers finally termed their goal "Unobtainium" (the spelling was later changed to "Unobtanium" to conform to the chemical element naming, although Unobtanium is a compound not an element). There matters stood until the first unmanned exploration vehicle reached Alpha Centauri System and discovered deposits of a room temperature superconducting substance on an Earth-like moon named Pandora - Unobtanium had been obtained at last.
It is a room temperature super-conductor for energy, which makes it very valuable: it is worth $20 million per kilogram (about 2.2 pounds) unrefined (worth $40 million per kilogram refined) on Earth. However, It is prohibitively expensive to mine on Pandora as humans are unable to breathe in the Pandoran toxic atmosphere. Because of this, all personnel are required to wear a Exopack which is very cumbersome. Humans transport Unobtanium on trucks called Hell Trucks from the mines back to Hell's Gate for refining.
Unobtanium proved to be the most baffling of scientific discoveries in the area of superconductors as it had an extremely strong magnetic field, reversing prior knowledge that all superconductors repel magnetic fields. Furthermore, unlike the fragile crystals of human-created superconducting compounds, the substance found on Pandora was a stable quasi-crystal with its atoms arranged in a never-repeating but orderly pattern with fourfold symmetry. This structure was not only structurally rugged but also has microscopic voids in the quasicrytalline structure that contain the magnetic flux lines. Unobtanium has a unique magnetic field and properties of superconductivity, causing it to levitate in magnetic fields under the Meissner Effect.
On Pandora, the magnetic effect causes huge outcroppings of Unobtanium to rip loose from the surface and float in the magnetic vortices. These huge islands, named Hallelujah Mountains by Human explorers, are called Thundering Rocks by the Na'vi, who hold them sacred. The unique magnetic properties of Unobtanium are used to contain and direct the energy of the Matter-Antimatter annihilation which propels ships like ISV Venture Star.
Without Unobtanium, interstellar commerce on this scale would not be possible. Unobtanium is not only the key to Earth’s energy needs in the 22nd century, but it is the enabler of interstellar travel and the establishment of a truly spacefaring civilization. Making a feedback loop, the more Unobtanium is mined, the more ships can be built, and more mining equipment can be sent to Pandora.
Originally, the term "unobtanium" was a joke used to describe hard-to-access materials. However, over the years, the name appears to have stuck.