A book cipher is a cipher in which the key is some aspect of a book or other piece of text; books being common and widely available in modern times, users of book ciphers take the position that the details of the key is sufficiently well hidden from attackers in practice. This is in some ways an example of security by obscurity. It is typically essential that both correspondents not only have the same book, but the same edition.
Traditionally book ciphers work by replacing words in the plaintext of a message with the location of words from the book being used. In this mode, book ciphers are more properly called codes.
This can have problems; if a word appears in the plaintext but not in the book, it cannot be encoded. An alternative approach which gets around this problem is to replace individual letters rather than words. One such method, used in the second of the Beale ciphers, substitutes the first letter of a word in the book with that word's position. In this case, the book cipher is properly a cipher — specifically, a homophonic substitution cipher. However, if used often, this technique has the side effect of creating a larger ciphertext (typically 4 to 6 digits being required to encipher each letter or syllable) and increases the time and effort required to decode the message.
The Bible and dictionaries are widely used source books.
More information, and a list of examples, on the Wikipedia page .