You hear the term Inciting Incident a lot in screenplay writing self-help articles. And it's true that the II is highly important to movies and T.V. You have to have something for people to stick around for after the commercial! (of course, not so much in this age of computers... but when I was a kid... yeah)
In writing it's just as important. Wiki Answers has a couple of great definitions for II:
The II is what sparks the adventure! Where would Harry Potter be if he had never gotten his letter from Hogwarts? And I don't need to tell you, master storyteller J.K. Rowling didn't make that as simple as walking out to the mailbox, either. The amount of potential energy wrapped up in what it took to get that letter to Harry and for him to find out he was a wizard carried her through 7 novels and 8 movies! Oh to write a scene like that...* The conflict that begins the action of the story and causes the protagonist to act*Without this event, there would be no story. Also, it is better described as the State of Imperfection made explicit.
The important thing about the II is that it should come along fairly early in your story line. It doesn't necessarily have to be in the first chapter or in the second, although usually SOMETHING inciting should have happened by the end of the second chapter. In HPaTSS, in the second chapter we find the prelude to the II... the incident at the zoo reveals that there really is something highly unusual about Harry, setting us up for the II actual in chapter three.
If you have too much set-up, you risk losing your reader's attention. Pushing your II up to the second or third chapter helps to tighten your plot and get your reader invested in your characters development (or survival: see Hunger Games).
What other examples of IIs can you think of in your favorite books?