A spotlight is a type of Fueled Lamp that can light up blocks up to 250 blocks away as long as it is fueled. The spotlight lights up blocks at a rate of 25 times the fuel intensity of the fuel source, so using Drum (Sweet Diesel) or a Beaker (Sweet Kerosene), for example will provide maximal lighting.
The light will propagate when the spotlight is fueled and travel until it hits a non-air block. There may be some modifications necessary to travel through glass and other transparent blocks in future releases after 1.3.6. For instance, as of 1.3.6, a torch will stop to the spotlight from spreading. The lighted area will be recalculated each time the fuel source changes or when the Spotlight is destroyed and rebuilt. Whichever unit of fuel is used, will burn until if finishes.
Hint: for mining long straight shafts, a spotlight can be ideal to eliminate the need to place many torches along your path. Use vials of fuel which don't last too long, so the spotlight refreshes every 30 seconds or so. Then you can fill it with beakers or drums to keep the lights on for a long, long time after the tunnel has been excavated.