Octane is a flammable gas.  Octane rating is an inverse measure of the
rate of autoignition or more precisely:

"The octane rating is a measure of the autoignition resistance of
gasoline (petrol) and other fuels used in spark-ignition internal
combustion engines.

Octane is measured relative to a mixture of isooctane
(2,2,4-trimethylpentane, an isomer of octane) and n-heptane. An
87-octane gasoline, for example, has the same knock resistance as a
mixture of 87 vol-% isooctane and 13 vol-% n-heptane. This does not
mean, however, that the gasoline actually should contain these chemicals
in these proportions. It simply means that it has the same autoignition
resistance as the described mixture.

The octane ratings of n-heptane and iso-octane are exactly 0 and 100, by
definition.

A high tendency to autoignite, or low octane rating, is undesirable in a
gasoline engine but desirable in a diesel engine. The standard for the
combustion quality of diesel fuel is the cetane number. A diesel fuel
with a high cetane number has a high tendency to autoignite, as is
preferred.  [Diesel fuel is not very volatile and very low octane.]

Typical "octane booster" additives include tetra-ethyl lead and toluene.
Tetra-ethyl lead is easily decomposed to its component radicals, which
react with the radicals from the fuel and oxygen that would start the
combustion, thereby delaying ignition.

It might seem odd that fuels with higher octane ratings burn less
easily, yet are popularly thought of as more powerful. The
misunderstanding is caused by confusing the ability of the fuel to
resist compression detonation (pre-ignition = engine knock) as opposed
to the ability of the fuel to burn (combustion). However, premium grades
of petrol often contain more energy per litre due to the composition of
the fuel as well as increased octane.

Using a fuel with a higher octane lets an engine run at a higher
compression without having problems with knock. Actual compression in
the combustion chamber is determined by the compression ratio as well as
the amount of air restriction in the intake manifold (manifold vacuum)
as well as the barometric pressure which is a function of elevation and
weather conditions.

Compression is directly related to power (see engine tuning), so engines
that require higher octane usually deliver more power. Engine power is a
function of the fuel as well as the engine design and is related to
Octane ratings of the fuel... power is limited by the maximum amount of
fuel-air mixture that can be stuffed into the combustion chamber.
Furthermore, most gasoline vehicles today are variable compression. At
partial load, only a small fraction of the total available power is
produced because the manifold is operating at pressures far below
atmospheric. In this case, the octane requirement is far lower than what
is available. It is only when the throttle is opened fully and the
manifold pressure increases to atmospheric (or higher in the case of
supercharged or turbocharged engines) that the full octane requirement
is achieved.

Many high-performance engines are designed to operate with a high
maximum compression and thus need a high quality (high energy) fuel
usually associated with high octane numbers, and thus demand high-octane
premium gasoline.

The power output of an engine depends on the energy content of its fuel,
and this bears no simple relationship to the octane rating. A common
myth amongst petrol consumers is that adding a higher octane fuel to a
vehicle's engine will increase its performance and/or lessen its fuel
consumption; this is mostly falseengines perform best when using fuel
with the octane rating they were designed for and any increase in
performance by using a fuel with a different octane rating is minimal."

See:  http://en.wikipedia.org/wiki/Octane_rating