Why have prices fallen so drastically around October 2011?
One thing a lot of people fail to notice is the decreasing volume at the exchanges. If we look at the USD volume - and not at the bitcoin volume, which is misleading because bitcoins are now worth much less - we can see a spike in June and a decrease afterwards:



The news reports in June attracted lots of people who were curious about bitcoin. A part of these people left and the market size is now coming back to April/May levels. As a consequence, there is much less money being traded. However, we still have 5 new coins being produced every minute and lots of miners who want their invested money back.
The current price is a natural consequence of high supply and low demand.