Pluto has been downgraded to a dwarf planet because it is smaller than some moons in the Solar System. Also it is so small it can’t clear its path of debris, and that is one of the conditions it has to be able to do if it wanted to be classified as a planet!
Officially, the reason is that it has not “cleared the neighbourhood of its orbit”. That is, if you look at the region of the solar system near Pluto’s orbit, you find a whole host of other bodies (they are known as “plutinos”, little Plutos) in very similar orbits – Pluto is just the largest of the gang. This does not happen with the 8 main planets: although in some cases there are objects in similar orbits (for example, Jupiter has the “Trojan asteroids”, which live 60 degrees ahead of and behind Jupiter in Jupiter’s orbit), they always make up only a very tiny fraction (<1%) of the mass of the planet. In contrast, if you added up the masses of all the plutinos (which we can't really do, because we don't have good mass estimates for most of them) they would probably contain more mass than Pluto itself does.
It's important to realise that this is not the first time that this has happened. When the first asteroid (1 Ceres) was discovered, it was unhesitatingly classed as a planet, though it was known to be very small (it was much fainter than the other planets, and did not show a visible disc in a small telescope). Even the discovery of another three objects in the same area (2 Pallas, 3 Juno and 4 Vesta) did not stop most people from calling them planets, so for a while in the early 1800s the solar system had 11 planets (Mercury, Venus, Earth, Mars, Vesta, Juno, Ceres, Pallas, Jupiter, Saturn, and Uranus – Neptune and Pluto hadn't been discovered). However, as morre asteroids were discovered, and it became clear that the first four were just the largest of a whole swarm of objects between Mars and Jupiter, people stopped calling them planets and began to call them "minor planets" or "asteroids" (it was the latter name that caught on, which is a bit unfortunate since it means "starlike", and asteroids aren't at all like stars – they just look similar in small telescopes!). So, despite all the fuss, deciding that Pluto was not a planet but only a dwarf planet was in line with what happened to Ceres in the 1800s.
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Susan commented on :
Officially, the reason is that it has not “cleared the neighbourhood of its orbit”. That is, if you look at the region of the solar system near Pluto’s orbit, you find a whole host of other bodies (they are known as “plutinos”, little Plutos) in very similar orbits – Pluto is just the largest of the gang. This does not happen with the 8 main planets: although in some cases there are objects in similar orbits (for example, Jupiter has the “Trojan asteroids”, which live 60 degrees ahead of and behind Jupiter in Jupiter’s orbit), they always make up only a very tiny fraction (<1%) of the mass of the planet. In contrast, if you added up the masses of all the plutinos (which we can't really do, because we don't have good mass estimates for most of them) they would probably contain more mass than Pluto itself does.
It's important to realise that this is not the first time that this has happened. When the first asteroid (1 Ceres) was discovered, it was unhesitatingly classed as a planet, though it was known to be very small (it was much fainter than the other planets, and did not show a visible disc in a small telescope). Even the discovery of another three objects in the same area (2 Pallas, 3 Juno and 4 Vesta) did not stop most people from calling them planets, so for a while in the early 1800s the solar system had 11 planets (Mercury, Venus, Earth, Mars, Vesta, Juno, Ceres, Pallas, Jupiter, Saturn, and Uranus – Neptune and Pluto hadn't been discovered). However, as morre asteroids were discovered, and it became clear that the first four were just the largest of a whole swarm of objects between Mars and Jupiter, people stopped calling them planets and began to call them "minor planets" or "asteroids" (it was the latter name that caught on, which is a bit unfortunate since it means "starlike", and asteroids aren't at all like stars – they just look similar in small telescopes!). So, despite all the fuss, deciding that Pluto was not a planet but only a dwarf planet was in line with what happened to Ceres in the 1800s.