Blizzard is implementing a faction switching service.
There is no immediate indication if this will be a free service or a pay service, however based on their past name change, character appearance, and server transfer services it likely will carry with it a small fee.
People have been talking about the ability for characters to switch races and factions for a long time. It appears to finally be here. Neth mentions that "the basic idea is that players will be able to use the service to transform an existing character into a roughly equivalent character of the opposing faction on the same realm."
She goes on to say that this will be carefully orchestrated to limit the impact in gameplay, and that they don't have all the details worked out yet. There are a lot of things to work out in this – mounts, quests, tabards, pets, achievements, etc... You don't really want to see a Blood Elf Paladin riding around on a Human Charger.
Stay tuned for more information on this very cool change as it's released.
The full announcement after the break.
The announcement from Nethaera:
We wanted to give everyone a very early heads-up that, in response to player requests, we're developing a new service for World of Warcraft that will allow players to change their faction from Alliance to Horde or Horde to Alliance. There's still much work to do and many details to iron out, but the basic idea is that players will be able to use the service to transform an existing character into a roughly equivalent character of the opposing faction on the same realm. Players who ended up creating and leveling up characters on the opposite factions from their friends have been asking for this type of functionality for some time, and we're pleased to be getting closer to being able to deliver it.
As with all of the features and services we offer, we intend to incorporate the faction-change service in a way that won't disrupt the gameplay experience on the realms, and there will be some rules involved with when and how the service can be used. The number of variables involved increases the complexity of implementing this service, but we plan to take the time needed to ensure that it lives up to expectations before officially rolling it out. We'll go into much more detail on all of this here at http://www.WorldofWarcraft.com as development progresses. In the meantime, we wanted to let you know that because this type of functionality requires extensive internal testing well in advance of release, you may be seeing bits and pieces of the service in the test builds we use for the public test realms moving forward.