Look, I am not now, nor will I ever claim to be an expert on politics. I think the very nature of politics is so widespread and so varied, no human being alive can rightfully make the claim that they are an expert on politics. Thus, many of the things I may say are slightly off, or I have the terminology wrong. Sue me.
That having been said, when I turned 18 and registered to vote, it came down to three choices. I could register as a Democrat, an Independent, or a Green. Well being an independent held some appeal as it allows you to cherry pick the points you like best from either party, but it didn't really seem to stand for anything. As a party, I found the Democrats to be somewhat spineless and distasteful at best, and at worst, "Conservatism-Lite."
The Green Party was the obvious choice. I agreed wholeheartedly with virtually all of their causes, platforms, and ideals. Unfortunately, registering under a third party is basically a political death sentence in this country because if there's one thing the Democrats and Republicans hate almost as much as the other one being in power, it's neither being in power.
The gargantuan financial might of each side in the two-party system has caused this country to go back on the ideals set forth by the founding fathers. Washington himself railed against the formation of political parties in his farewell address, but the system has become such that in virtually every major election, neither candidate is especially palatable because they must conform to an ultra-moderate, uninteresting line of ideals. When was the last time there was a Republican or Democratic Ticket that you REALLY liked?
What we often find is that we agree with Candidate Elephant on A, B, and C, but disagree on D, E, F, G, and H. Whereas with Candidate Donkey we might agree with them on D, E, F, and G, but disagree on A, B, C, and H. Well, there you go, vote for the Donkey...but you're still putting a person in power with whom your ideals are only 50% compatible. When I went to school, that was still a failing grade (by a lot).
There is often a candidate in every election that puts together a good portion of the best that either has to offer, but they never get any votes. Why? Because the cash-machines that are the Democrats and Republicans are constantly working to get "third parties" off the ballot in every state and every election they can. That's right, they constantly strive to limit who you can vote for. How is this democratic?
The Ds and Rs are afraid of two things. That a third party will steal enough votes from them to put the opposition in power, and that a third party will gain enough of a foothold to begin to render either obsolete in the future. Most people assume it's largely the former. I actually think it's the latter.
If the Ds or Rs were truly ONLY concerned with vote-stealing, then there would be a harder push for a voting system in place (such as Instant-Runoff Voting) that would neutralize the effects of vote-stealing. Instant Runoff Voting allows voters to rank their preference of candidates from greatest to least.
Take an Election of 100 votes split between three candidates. Candidate A receives 43 first place votes. Candidate B receives 41 first place votes. Candidate C receives 16 first place votes. Neither candidate A or B have a majority. So Candidate C is eliminated, and any ballot cast for them is read from the second place vote. Let's say there are 10 second place votes for Candidate B, and 6 for A. Candidate B would win the election 51-49.
In an actual election, candidate C would be a third party, such as the Green Party. The Democrats wouldn't have to worry about potential votes stolen since the majority of liberal Greens would likely prefer a Democrat to a republican in office, and thus would likely rank their candidate second.
However, neither major party really gives a shit about voter reform unless they think they got fucked in a major election by illegal things such as disenfranchisement. Therefore, it's less about fear of vote-stealing and more about preserving the status quo of the two party system.
In any state election, a "third party," must circulate a petition with a certain number of signatures in order to get their candidate's name on the ballot. What Ds and Rs will do (to the Greens and Libertarians) is challenge many of those signatures in court in an attempt to get them thrown out, thus keeping that candidate off the ballot. Since the Ds and Rs command so much money, many of these battles never even make it to court as the state and local "third parties" are unable to raise the funds to fight either of the two major powerhouse political parties.
It keeps fledgling political movements from gaining any ground (which admittedly isn't always a bad thing. Looking at you Tea Party), which prevents them from gaining any national exposure in the long run. It's increased the exclusivity of national debates to the point where any "third party" is laughed at when they bring up the notion of being included.
Unfortunately there is no easy way to break the mold, especially with Ross Perot's actions in 1992 essentially killing any chance that a third party had of actually getting elected. The system is broken, and the only groups that can change the system are the ones that don't want to. The only way for a third party candidate to get elected would be if the Ds and Rs put out two extremely unlikable candidates, which will probably never happen. But hey, you can always hope for, say, Pelosi vs. Palin in 2012!