The consensus mechanism in Ethereum is based on the Greedy Heaviest Observed Subtree (GHOST) protocol proposed initially by Zohar and Sompolinsky in December 2013.
Readers interested in it can explore the detailed original paper at http://eprint.iacr.org/2013/881.pdf.
Ethereum uses a simpler version of this protocol, where the chain that has most computational effort spent on it to build it is identified as the definite version. Another way of looking at it is to find the longest chain, as the longest chain must have been built by consuming adequate mining effort. GHOST protocol was first introduced as a mechanism to alleviate the issues arising out of fast block generation times that led to stale or orphan blocks. ...
