Magnetic refrigeration is not something that has just been discovered or thought up. It actually was first observed by German physicist Emil Warburg back in 1880 and the very first fundamental principle of it was noted by Debye in 1926 and the following year by Giauque. One of the first working magnetic refrigeration systems was actually built back in 1933. In fact it was the very first method of finding a way to cool below 0.3 K.
So what is magnetic refrigeration? It is a phenomenon where there is a reversible change in a temperature of a material that is caused by exposing it to a changing magnetic field. It's known to physicists as adiabatic demagnetization because it's an application that is specifically created for a drastic temperature drop. What it does, is allow the magnetic domain of a particular material to become what is known as disoriented from the magnetic field by agitating the thermal energy or phonons that are in the material. If it is isolated and no energy is allowed to migrate into the material during all of this, the temperature will drop as the domain absorbs the thermal energy during it's reorientation.
One of the best examples of this effect is the chemical element of gadolinium and its alloys. It has been observed that the temperature of gadolinium will increase when it enters into certain magnetic fields. When it leaves these fields its temperature will drop.
When techniques are applied to refrigeration systems, a strong magnetic field will be applied to a refrigerant, this will force different magnetic dipoles or circulation of electric currents, in the refrigerant to go into a lowered state of entropy or thermodynamic property. The stronger the magnetic field might be, the more aligned the dipoles are going to be. If they keep the refrigerant at a constant temperature through this thermal contact with a heat sink while they switch on the magnetic field, the refrigerant will some of it's energy. When it is turned off the heat capacity of this refrigerant will rise again and this insulates the system with a magnetic field. When this happens, the temperature of the refrigerant will be decreased.
There have been a few materials that have been discovered that can create magnetic refrigeration, however, gadolinium and some of its alloys are probably the best materials that are available for being able to create refrigeration systems that can keep things near room temperature when needed. At this point in time though, these types of refrigeration systems are not yet proven to be viable, but when they are, the possibilities are great. Once confirmed viable, magnetic refrigeration could be used for cooling systems, heating systems and even used in power generation. Even appliances might be able to use this as refrigeration systems and would have a much smaller impact on the environment, however, there are still some technical and efficiency points that still need to be analyzed further before this type of refrigeration should be considered in using in wide use refrigeration systems.