Taken from Sheldon Browns great website! So much useful info. I believe that he passed away a few years ago - so never got to see the rise of a new wheel size.

Twenty Niner
The so-called "29 inch" tire size is not actually a new size, it is just a new marketing term for 622 mm (700C) wheels with fat tires.
This size is probably a good option for taller riders for off-road use, compared with 559 mm (26 inch decimal) wheels. Larger-diameter wheels don't sink as far into holes, so they give a better ride in rough conditions.