To me great installation art is something that makes great use of the space, and not just a sort of pseudo sculpture sitting in a corner hoping people pay attention.
I also enjoy being able to interact with installations, even if it's only in a simple way such as being able to walk through or under it, not just look at it.
My favourite of all time was Anthony McCall's Vertical works, which were projections of shapes down from the ceiling in the dark and you could walk through them, and it really felt like you were about to touch something physical like a wall only nothing was there to touch. [link] Photos obviously do it no justice, and in a way that's a good thing because an installation should first and foremost look it's best in the location, not in photographs of it.
Like anything else, it can be done well or done poorly. I did a couple installations in college, but I haven't really been interested in that kind of work in a while. I've certainly seen examples since, but it is difficult to recall names. I will say that I am still very fond of Edward Kienholz's largescale installations/tableaux.
Might also look into happenings or other forms of performance and conceptual art that involve some kind of temporary installation element. I've always liked Beuys and find some of the work done by Fluxus artists interesting.
The installations I did in school involved photo-prints in a specially designed setting. My second one didn't go over so well in critique, but it was put together in less time and not thought through as deeply as the first. The first involved cyanotypes hung from the ceiling with wire, along with white sheets and blue lights, with a hidden TV tuned to static for light and noise.
You mean installation art, I find it impressive when someone does it right. And my favorite would be a guy called Sean from my class who did a piece but outside it was amazing and he got a pretty high grade. Also my thoughts are don't rush into make sure your idea suits your topic and the environment it is going to be placed in.