Miko are shrine maidens (for lack of a better term) who act as supplementary priestesses found at Shinto Shrines. Miko offered prayers to the deities and were oracles. In the past shrine maidens performed the sacred kagura dances of dedication to the deity to bless worshipers. Miko in the past were said to have the power to communicate with the spirits of the dead and with the shrines deity. Since they were messengers of the kami they were often powerful figures and some times even rulers. In the 1930's, with the rise of State Shinto (mouthpiece for the militarist regime), Miko were banned on the grounds that they made Japan look foolish and superstitious. After the end of World War II, they have made a comeback continuing the practices they've been doing for ages.
Modern day Miko's are often the daughter of the priest who presided over a given shrine. Though a lot of miko are part-time employees or volunteers. Their duties include assisting with shrine functions, performing ceremonial dances, offering Omikuji (a type of fortune telling), and staffing shrine shops.
Miko are not priestesses. Shinto doesn't have priestesses. They do have female priests though. Miko do not have the same degree of authority as that of an actual priest, although they can serve as the senior cleric of a shrine if no priest is available. Quite often, upon being married, Miko either quite or begin training for priesthood.
The traditional clothing for miko consists of hibakama (a type of hakama, leg covering -usually red), a kimono shirt, and tabi (socks usually white with a separation between the big toe and other toes). Occasionally miko wear a thin white haori called chihaya (a long-sleeved top). The kimono shirt has long, wide sleeves and is always white, as white is a symbol of purity. They will often wear white or red ribbons in their hair.
In fiction Miko often have martial arts abilities and the ability to do magic of various sorts, especially o-fuda and various forms of divination.
In Sailormoon one of the characters, Rei-Sailor Mars, is a miko. She has divination ability via a sacred fire and one of her attacks is to power up an o-fuda and say the mantra "Rin, pyou, tou, sha, kai, jin, retsu, sai, zen. Akuryou taisan!". What she is doing is the kuji-in (Nine Syllable Seals). Technically the word "Kuji-in" refers only to the hand postures (mudra) and their related incantations (mantra). The related practice of making nine cuts--five horizontal and four vertical, alternating--in the air with the finger or on paper with a brush is known as "kuji kiri," nine syllable cuts. In Japanese folk-magic and Onmyodo, the nine cuts are often made over writing or a picture, to gain control of the object named or pictured. Thus, a sailor wishing to be protected from drowning might write them over the kanji for "sea" or "water". The Kuji-in practice symbolizes that all the forces of the universe are united against evil; because of this, it was often used by the common people for luck when traveling, especially in the mountains. Amatsu Tatara means "Sky Harbour", or more literally Divine Residence/God's Portis. It is also the highest and oldest scroll of martial arts and Shinto spirit, dating back to 7BC.
The above picture is taken from the Ranma manga. Akane, Ukyo, and Ranma are volunteer miko.