The technique, also known as GMR, has allowed the computer industry to develop sensitive reading tools for information stored on computer hard drives from tiny laptops to feature-rich personal music and video players.
"Applications of this phenomenon have revolutionized techniques for retrieving data from hard disks," the prize citation said. "The discovery also plays a major role in various magnetic sensors as well as for the development of a new generation of electronics."
It said the discovery can also be considered "one of the first real applications of the promising field of nanotechnology," the Royal Swedish Academy of Sciences said.
In 1988 Fert and Gruenberg each independently discovered a totally new physical effect, GMR. In this effect, very weak changes in magnetism generate larger changes in electrical resistance. This is how information stored magnetically on a hard disk can be converted to electrical signals that the computer reads.
"The development of computers showed in the last years that this was an important contribution," Gruenberg told Sweden's TV4 channel shortly after being told he was sharing the prize with Fert.
The pair will split the 10 million Swedish kronor (US$1.5 million; euro1.1 million) prize.
Last year, Americans John C. Mather and George F. Smoot won for their work examining the infancy of the universe, studies that have aided the understanding of galaxies and stars and increasing support for the Big Bang theory of the beginning of the universe.
On Monday, two American scientists, Mario R. Capecchi and Oliver Smithies, and Briton Sir Martin J. Evans, won the 2007 Nobel Prize in medicine for groundbreaking discoveries that led to a powerful technique for manipulating mouse genes.
Prizes for chemistry, literature, peace and economics will be announced through Oct. 15.
The peace award is announced in Oslo, while the other prizes are announced in Stockholm. The prizes were established in the will of Swedish industrialist Alfred Nobel.
The Nobel prizes are always presented to the winners on the Dec. 10 anniversary of the death of its creator.