Actually, I found this to be a bit of a surprise. I expected Putin to be 1st, 2nd, or 3rd Runner-up...but the actual "Person Of The Year", quite a surprise. The Russian President is, however, a very noteworthy individual on the world stage, even though he does butt heads with the American government on several issues.
TIME did explain their reasoning for choosing Putin rather well, especially in these two paragraphs.
When this intense and brooding KGB agent took over as President of Russia in 2000, he found a country on the verge of becoming a failed state. With dauntless persistence, a sharp vision of what Russia should become and a sense that he embodied the spirit of Mother Russia, Putin has put his country back on the map. And he intends to redraw it himself. Though he will step down as Russia's President in March, he will continue to lead his country as its Prime Minister and attempt to transform it into a new kind of nation, beholden to neither East nor West.
TIME's Person of the Year is not and never has been an honor. It is not an endorsement. It is not a popularity contest. At its best, it is a clear-eyed recognition of the world as it is and of the most powerful individuals and forces shaping that world—for better or for worse. It is ultimately about leadership—bold, earth-changing leadership. Putin is not a boy scout. He is not a democrat in any way that the West would define it. He is not a paragon of free speech. He stands, above all, for stability—stability before freedom, stability before choice, stability in a country that has hardly seen it for a hundred years. Whether he becomes more like the man for whom his grandfather prepared blinis—who himself was twice TIME's Person of the Year—or like Peter the Great, the historical figure he most admires; whether he proves to be a reformer or an autocrat who takes Russia back to an era of repression—this we will know only over the next decade. At significant cost to the principles and ideas that free nations prize, he has performed an extraordinary feat of leadership in imposing stability on a nation that has rarely known it and brought Russia back to the table of world power. For that reason, Vladimir Putin is TIME's 2007 Person of the Year.
The runner-ups were interesting, if not slightly predictable.
1st Runner-Up - An Inconvenient Former VP, Al Gore (if anyone saw this as a surprise, they should be smacked for false ignorance, I'm just glad he didn't win).
2nd Runner-Up - Harry Potter author J.K. Rowling, whose fame is pretty much up now that the Potter series is over and done with.
3rd Runner-Up - Chinese President Hu Jintao
4th Runner-Up - General David Petraeus, who should honestly be flipped with Gore, because Petraeus managed to forge success when the new Congressional majority (Democrats) tried to give him every conceivable path to failure.
UPDATE: Henry Ryto brings up an EXCELLENT point in the comments below...where is Nicolas Sarkozy on this list??? That man may single-handedly change European-American relations, and actually has been a catalyst for the rapid improvement of Franco-American relations. Good call, Henry.