http://www.nasa.gov/centers/goddard/news/topstory/2008/lunar_telescopes.html

"We could make huge telescopes on the moon relatively easily, and avoid the large expense of transporting a large mirror from Earth," says Peter Chen of NASA Goddard and the Catholic University of America, which is located in Washington, D.C. "Since most of the materials are already there in the form of dust, you don’t have to bring very much stuff with you, and that saves a ton of money..."

"...Our method could be scaled-up on the moon, using the ubiquitous lunar dust, to create giant telescope mirrors up to 50 meters in diameter." Such an observatory would dwarf the largest optical telescope in the world right now: the 10.4-meter Gran Telescopio Canarias in the Canary Islands.

The capabilities of a 50-meter telescope on the Moon boggle the imagination, according to NASA. With a stable platform, and no atmosphere to absorb or blur starlight, the monster scope could record the spectra of extra solar terrestrial planets and detect atmospheric biomarkers such as ozone and methane. Two or more such telescopes spanning the surface of the Moon can work together to take direct images of Earth-like planets around nearby stars and look for brightness variations that come from oceans and continents. Among many other projects, it could make detailed observations of galaxies at various distances, to see how the universe evolved...."