The sudden vertical rise of the seabed by several metres during the earthquake displaced massive volumes of water, resulting in a tsunami that struck the coasts of the Indian Ocean. A tsunami which causes damage far away from its source is sometimes called a "teletsunami", and is much more likely to be produced by vertical motion of the seabed than by horizontal motion (Earthquakes and tsunamis, Lorca et al.).
See a full-length animation of how the waves travelled (large file, about 1 MiB) to see exactly how and why some countries were more affected than others
The tsunami, like all others, behaved very differently in deep water than in shallow water. In deep ocean water, tsunami waves form only a small hump, barely noticeable and harmless, which generally travels at a very high speed of 500 to 1,000 km/h (310 to 620 miles/h); in shallow water near coastlines, a tsunami slows down to only tens of kilometres an hour but in doing so forms large destructive waves . Scientists investigating the damage in Aceh found evidence that the wave reached a height of 80 feet (24 m) when coming ashore along large stretches of the coastline, rising to 100 feet (30 m) in some areas when travelling inland .
Radar satellites recorded the heights of tsunami waves in deep water: at two hours after the earthquake, the maximum height was 60 cm (2 ft). These are the first such observations ever made. However, these observations could not have been used to provide a warning, because the satellites were not intended for that purpose and the data took hours to analyze  .
According to Tad Murty, vice-president of the Tsunami Society, the total energy of the tsunami waves was about five megatons of TNT (20 petajoules). This is more than twice the total explosive energy used during all of World War II (including the two atomic bombs), but still a couple of orders of magnitude less than the energy released in the earthquake itself . In many places the waves reached as far as 2 km (1.24 mi) inland .
Because the 1,200 km of faultline affected by the quake was in a nearly north-south orientation, the greatest strength of the tsunami waves was in an east-west direction. Bangladesh, which lies at the northern end of the Bay of Bengal, had very few casualties despite being a low-lying country relatively near the epicenter. It also benefitted from the fact that the earthquake proceded more slowly in the northern rupture zone, greatly reducing the energy of the water displacements in that region. 
Coasts that have a land mass between them and the tsunami's location of origin are usually safe; however, tsunami waves can sometimes diffract around such land masses. Thus, the Indian state of Kerala was hit by the tsunami despite being on the western coast of India, and the western coast of Sri Lanka also suffered substantial impacts. Also distance alone is no guarantee of safety; Somalia was hit harder than Bangladesh despite being much farther away.
Because of the distances involved, the tsunami took anywhere from fifteen minutes to seven hours (for Somalia) to reach the various coastlines (see travel time maps: , ). The northern regions of the Indonesian island of Sumatra were hit very quickly, while Sri Lanka and the east coast of India were hit roughly 90 minutes to two hours later. Thailand was also struck about two hours later, despite being closer to the epicentre, because the tsunami travelled more slowly in the shallow Andaman Sea off its western coast.
The tsunami was noticed as far as Struisbaai in South Africa, some 8,500 km (5,300 miles) away, where a 1.5 m (5 feet) high ‘tide’ surged onshore about 16 hours after the quake. It took a relatively long time to reach this spot at the southernmost point of Africa, probably because of the broad continental shelf off South Africa and because the tsunami would have followed the South African coast from east to west .
Some of the tsunami's energy escaped into the Pacific Ocean, where it produced small but measurable tsunamis along the western coasts of North and South America, typically around 20 to 40 cm (7.9 to 15.7 inches) . At Manzanillo, Mexico, a 2.6 m (8.5 feet) crest-to-trough tsunami was measured. Experts have speculated that this relatively large tsunami at such a great distance was caused by focusing effects of Pacific and local geography .
Scientists were also hampered because the initial estimate for the magnitude of the earthquake was 8.1. The determination that the earthquake had actually been much stronger (and the resulting tsunami much larger) was not made until after the tsunami had already struck.
Tsunamis usually occur in the Pacific Ocean due to earthquakes in the "Ring of Fire", and an effective tsunami warning system has long been in place there. Although the extreme western edge of the "Ring of Fire" extends into the Indian Ocean (the point where this earthquake struck), no warning system exists in that ocean because tsunamis there are relatively rare; the last major one was caused by the Krakatoa eruption of 1883.
In the aftermath of the disaster there is a new awareness of the need for a tsunami warning system for the Indian Ocean. The UN has started working on an Indian Ocean Tsunami Warning System and aims to have initial steps in place by end 2005 . Some have even proposed creating a unified global tsunami warning system, to include the Atlantic Ocean and Caribbean. See International Early Warning Programme.
However on 28th March 2005, an 8.7 seaquake in roughly the same area failed to produce killer tsunamis. This earthquake is ranked as the 7th largest in the world. So if it fails to produce killer tides, it makes it seem as if it would require extreme and unlikely events to cause another one in this region. More so than the 7th largest earthquake since 1900.
See also the 2004 Indian Ocean tsunami timeline, a minute to minute account by the National Oceanic and Atmospheric Administration (NOAA).