http://www.mnn.com/earth-matters/animals/stories/immortal-jellyfish-does-it-really-live-forever

While it is often joked that cats have nine lives, a certain species of jellyfish has been deemed “immortal” by scientists who have observed its ability to, when in crisis, revert its cells to their earliest form and grow anew. That means that these tiny creatures, 4 mm to 5 mm long, potentially have infinite lives.

The creature, known scientifically as Turritopsis nutricula, was discovered in the Mediterranean Sea in 1883, but its unique regeneration was not known until the mid-1990s. How does the process work? If a mature Turritopsis is threatened — injured or starving, for example — it attaches itself to a surface in warm ocean waters and converts into a blob. From that state, its cells undergo transdifferentiation, in which the cells essentially transform into different types of cells. Muscle cells can become sperm or eggs, or nerve cells can change into muscle cells, “revealing a transformation potential unparalleled in the animal kingdom,” according to the original study of the species published in 1996.

Since the Turritopsis’ virtual immortality was discovered, so have swarms of genetically identical jellyfish far from their original habitat, including in Japan, Spain and the Atlantic Ocean side of Panama. Researchers have concluded that these multiplying creatures are getting caught in ballast waters, water that is sucked into and pumped out of the long distance cargo ships. Polyps also could be growing on the ship’s hulls. Though genetically identical, these jellyfish seem to have adapted to their new environments. For example, specimens from swarms living in tropical waters have been found to have eight tentacles, while those discovered in temperate regions have 24 or more tentacles.

But Turritopsis can — and do — die. Their regeneration only occurs after sexual maturation, therefore they can succumb to predators or disease in the polyp stage. But because the jellyfish are the only known animal with this “immortality,” scientists are studying them closely, with the hopes of applying what they learn to issues such as human aging and illness.

One of the paper’s authors, Ferdinando Boero, likened the Turritopsis to a butterfly that, instead of dying, turns back into a caterpillar. Another metaphor is a chicken that transforms into an egg, which gives birth to another chicken. The anthropomorphic analogy is that of an old man who grows younger and younger until he is again a fetus. For this reason Turritopsis dohrnii is often referred to as the Benjamin Button jellyfish.

Essentially a mature individual can transform itself into polyps, or a whole bunch of baby jellyfish. This cycling through of the stages of life is why it is called "immortal." However, while mind-blowing, we have to keep at least one foot in reality here. While theoretically this process can go on indefinitely, the fact is most individuals of the species do actually die, and there is no laboratory evidence showing continuous generations created in this strange way.
Okay, so Turritopsis nutricula is not exactly immortal as in it has been alive forever and will be alive forever. But it does indeed have the ability to reproduce in a, well shall we say immortal-like way that no other known creature can. Could the jellyfish hold the key to actual immortality? That is still up for debate.

Here's a fantastic video explaining this curious creature:

http://www.youtube.com/watch?v=2kLSiE-eNjw&feature=player_embedded