The public option is a euphemistic term for part of the proposed government takeover of medicine, which would require individuals and employers to purchase health insurance (or else be fined) and offer a government-controlled insurance plan for them to purchase.
Private insurance companies want a requirement that individuals and employers purchase health insurance, but do not want the government to provide taxpayer-funded health insurance in competition with the private plans.
While a public option is supposedly meant to compete alongside private insurance, many recognize that it could easily bankrupt most private insurance because of its unfair advantage due to its taxpayer support and lead to a "single payer" or government-controlled universal healthcare system. Congressman Barney Frank specifically said, "I think the best way we’re going to get single payer, the only way, is to have a public option and demonstrate the strength of its power." Even President Obama has expressed support for a single payer system, although he has also stated that it might be too abrupt a change for the American people.