Astronomers figure out what elements compose an exoplanet by studying how light from the planet's star is absorbed as the planet passes in front of it. Until now, Neptune-sized and smaller planets hadn't been possible to study, probably because of heavy cloud cover. When HAT-P-11b passed in front of its host star, in the constellation Cygnus, it showed clearly the planet had water vapor.
This bodes well for the search for life elsewhere in the galaxy. Life as we understand it requires liquid water, carbon-based molecules, and an energy source; in the case of humans, that energy source is the sun. We know life can survive on an Earth-sized planet in the habitable zone: we're proof. Now, if we can detect water vapor on similar planets, we may have a better bead on where to look for other kinds of life.
Of course, a Neptune-sized planet is still about four times larger than Earth. But this discovery, made using instrumentation on the Hubble Space Telescope, bodes well for Hubble's successor, the James Webb Space Telescope, which is due to be launched in 2018. The JWST will carry sensitive instruments and also have a much larger mirror than the Hubble, which means it will be able to detect signals that are currently too faint to analyze.