All of the following is taken from various sections of the ABC Science website. Sorry to just copy and past slabs of text, but I think its all relevant...

The story so far
Running a car on hydrogen and oxygen is viable, however with current technology it takes more energy to split the water back into hydrogen and oxygen than the useful energy you get out. Fine if you have huge banks of solar photovoltaic cells, and lots of water, but it does involve significant capital costs. Also, storing the hydrogen and oxygen is complex and/or expensive.

Used in West Oz
Hydrogen cars are used in various parts of the world. In West Australia they are trialling buses with big hydrogen tanks. One of the problems is that you need the infrastructure in place, such as hydrogen fuelling stations, or technology to convert hydrogen from the air.

New Development
Researchers have split water into hydrogen and oxygen by replicating how plants use photosynthesis to make carbohydrates. The team of Australian and US researchers says their findings, could lead to a cheap and easy way of making hydrogen, which many experts believe is the green fuel of the future.

There is a heap more on there if anyone has the time to read it all...