In "Experience Models: Where Ethnography and Design Meet" presented at the EPIC2006 conference, Rachel Jones discusses the roles of ethnography in design. She gives a quick overview of the literature regarding this topic:

"Identifying “sensitizing” concepts (the identification of researchable topics)

Developing specific design concepts (studying settings that may shed light on what abstract design concepts might mean concretely in order to sketch out and work up potential design solutions)

Driving innovative technological research (explore the sociality of novel design spaces opened up by radical technology in real world settings)

Evaluating design (conduct a “sanity check” on the design. Ethnography has also been used to inform the iterative design)

Context awareness (immersing researchers, designers and sometimes clients in the setting, for the purpose of understanding the context in which a product will be developed)

Identifying key emerging themes (an area of study, and developed with a view to identifying design opportunities and influencing design solutions)

Developing experience frameworks (models that identify the key components of an experience and indicate the structural relationships between those components... facilitate the generation and mapping of opportunities)"

Why do I blog this? interesting overview, material for my UX course where I show the importance of "people research" (based on ethnography-inspired methods) for design.

On a different note, I am less and less using the term ethnography because (1) I am not an ethnographer, (2) the use os methods coming from ethnography is far different from conducting ethnography, (3) there seems to be some weird trend currently that confuse ethnography with data collection.