What are some theoretical explanations for deviations from the efficient market hypothesis? According (the semi-strong form of) the efficient market hypothesis, the price of an asset should reflect all publicly available information about the 'fundamental value' of that asset. The reasoning is that if there is some public information that suggests the price is below the fundamental value then people will have an incentive to act on this information and buy more of the asset. This increase in demand will cause the price of the asset to rise, closing the original price-value discrepancy.

This reasoning seems intuitively plausible, but significant price-corrections during the recent recession seem to suggest that markets had systematically priced in a manner inconsistent with underlying fundamentals. What academic theories (i.e. published or in working papers) have been advanced (and by whom) to explain why the efficient market hypothesis might fail? Is there much of an empirical consensus on the validity of the efficient market hypothesis in the literature?
I think this piece by John Cochrane represents a typical defense of the efficient market hypothesis from this kind of critique. Here's another. The basic summary is that market efficiency does not imply that expected returns cannot vary or that bubbles will not happen. Bubbles should be unpredictable, and variation in expected returns should be driven by risk or discount factors. Whether that's the case for the financial crisis is definitely a matter of debate.

Do people believe in efficient markets? I think that varies a lot from field to field. It might be more useful to say that efficient markets are usually the null or prior that academics in finance and economics work with when they try to understand something. That is to say if you want to use some data to try to convince them that financial markets aren't efficient, you face an uphill battle, but the struggle isn't impossible.