There's been a long raging debate in some circles over whether lobster (and other crustaceans) can feel pain. I suspect this arose in part because those who like lobster justified the lobsters thrashing around when thrown into boiling water by saying "They don't feel pain." In any event, there have been several studies in recent years to try and determine whether or not lobsters do feel pain, and the science is determining that YES, they can and do feel pain.
One of the authors of the study points out that most people who argue that lobsters don't feel pain use only arguments, not science. Logically, it would seem that all creatures have an avoid pain/seek pleasure type of hard wiring, but it's been a serious research problem.
While you can find the story and a summary of the study many places, I like the NPR report best, as there's a nice interview with one of the researchers. He points out that he's not advocating that everyone stop eating these animals, but that people recognize it is not appropriate to toss lobsters in boiling water, to stab living prawns onto skewers, or to eat live, raw flesh of crustaceans. He advocates humanely killing the animals before consumption, a middle ground position most people ought to be able to live with.
Personally, I could never eat lobster after watching them be cooked when I lived in Maine. While I am glad science has been able to demonstrate the suffering objectively, for me it was enough to see the lobsters desperately trying to get out of the pot; if it wasn't genuine suffering, it certainly gave the appearance of it, and that was enough for me.
I found another interesting lobster related article, this one on a Scottish blog (See the 10-9-07 entry). The author discusses a technique he learned from an old man of the sea - hypnotizing lobsters. It's worth a read.