How does the Nephalem Valor buff work?

At level 60, the Nephalem Valor buff kicks in. Killing champion packs increase the effect, which gives a boost to gold and magic find, and increases the number of drops from bosses.

How many stacks can you get? What causes you to lose stacks? How much gold find and magic find does each stack give? How many extra drops from bosses does it give? Is it any boss, or only Inferno bosses?

Solution 1:

The entire Nephalem Valor concept has been removed since Patch 2.0.1 (live on Feb. 25, 2014). Along with this change, two new concepts have been added to the game (Official Patch Notes):

Pools of Reflection have been added to the game

• Pools of Reflection provide a 25% bonus to experience
• This bonus persists until you reach a set amount of bonus experience (equal to approximately 10% of the current amount of Paragon experience needed to reach the next Paragon level) or your character dies
• Gathering additional Pools of Reflection bonuses increases the amount of total experience bonus a character can receive until character death, stacking up to 10 times
• This experience bonus persists on logout

Nephalem Glory has been added to the game

• Occasionally during battle, monsters will drop Power Globes when damaged or killed
• Power Globes grant the Nephalem Glory buff, which causes players to deal additional damage in the form of golden lightning bolts and increases their movement speed for a short time
• This buff can stack up to three times

Solution 2:

Paragon Levels Update : From Blizz blog here.

With the 1.0.4 patch, Bliz has announced that Nephalem Valor will be modified to provide a 15% experience bonus, in addition to the magic find and gold find bonuses that it alread provided. After the patch there is also a cap on MF/GF to 300%, however Nephalem Valor will be added after that cap, so with 5 stacks of NV, it is possible to hit 375%/375% MF/GF.

To support the new system, Nephalem Valor (NV) will now also provide a 15% experience bonus per stack, applicable toward Paragon levels

With the Paragon system in place, we’re capping Magic Find and Gold Find to 300% (before Nephalem Valor). This means that without any Magic Find gear at all, you’ll hit the cap when you reach Paragon level 100.

Edit with added detail: From this thread

Note that I've modified the bold values based on Rapida's suggestion. I found another thread which confirms that the actual values are15% per stack, up to 75% total.

Whenever you kill a pack of Blue monsters, or a Yellow, you receive 1 charge of Valor. This buff currently gives you [+15% Magic Find], per charge. You can have up to 5 charges and each one lasts 30 minutes. (So if you kill a pack of blues/yellow every 6 minutes, you will always have [+75%] MF)

The downside to this ability is, every time you modify any of your skills, all of your charges fall off.

I can add from other comments in the thread that you lose the bonus for logging out (after a small timeout for dropped links), but not for dying. Note also from the below that killing additional champion/elite/unique monsters restarts the 30 min timer for each kill. Note also that killing purple (Elite quest mobs), does not count.

The buff lasts 30mins , but after u kill more magic mobs u get an addition stack till u get to 5 , then u refresh it by killing more magic mobs, u can have it up all the time

Purple ones (quest elite monsters) do not add a stack.

Original Answer (with just a few edits where new details are known)

Blizzard themselves have only released a limited amount of details on this feature, and they have given the caveat that it is subject to change.

Diablofans has a good recap here. Pertinent details are:

• The Nephalem Valor buff increases a player's Magic Find as well as increase the amount of loot drops from a boss.
• The Nephalem Valor buff will be available only to characters of level 60.
• After killing an Elite monster, the Nephalem Valor buff will be activated.
• The Nephalem Valor buff can stack.
• The buff will disappear if you change a skill, skill rune, passive skill or leave the game.
• If a player joins a game, they will not receive the current buff other players may already have.
• Dying will not cause the buff to disappear. If disconnected, there will be a small grace period before disappearing.

In additional clarifications from Blizzard, some more of your specific questions are answered.

Q: When you say extra loot, do you mean, extra loot. Or do you mean extra loot that is on par with what elite/champs drop. I remember from the article before, bosses do not drop gear that is as good as champs/elites.

A: They will drop gear as good as champions and elites with this buff (because you have to kill champions and elites to get it, which was the point). With the buff active you’re guaranteed one extra item drop from the boss, and it’s likely that it’ll be 1 item per stack of the buff. Up to X stacks. We don’t know how many it’ll be, probably a handful.

Solution 3:

Nephalem Valor is a buff available at level 60 that increases your Gold and Magic Find by 15% per stack to a maximum of five stacks, as well as the amount of loot dropped by unique bosses. A stack is attained by killing a Champion (blue) or Elite (yellow) mob packs - unique bosses (purple) do not charge it. The buff lasts for 30 minutes, and gaining an additional stack recharges it to its full duration. It's only removable by leaving the game, timing out the buff, or changing skills.

Solution 4:

Please note, for Playstation and Xbox versions, this buff stacks to a maximum of 3 for the full nephalem valor effect. It then becomes 25% per stack, which amounts to the full 75% bonus to magic find, and gold find.