The current theory is called the Nebular or Condensation Theory of Solar System Formation.
A disk-shaped solar nebula that formed when a large cloud of interstellar gas contracted and flattened under the influence of its own gravity. In the modern theory, interstellar dust is composed of microscopic grain particles that:
• are thin, flat flakes or needles about 10-5 m across;
• are composed of silicates, carbon, aluminum, magnesium, iron, oxygen, and ices;
• have a density of 10-6 interstellar dust particles/m3.
In Active Accretion, these interstellar dust grains are simply referred to as ‘dust.’ There is some evidence that interstellar dust forms from interstellar gas. Interstellar gas, the matter ejected from the cool outer layers of old stars, is 90 percent molecular hydrogen (H2) and 9 percent helium (He). The remaining 1 percent is a mixture of heavier elements, including carbon, oxygen, silicon, magnesium and iron. The interstellar dust from which the planets and asteroids formed was that mixture of heavier elements. The hydrogen and helium from the nebula was involved in the formation of our infant Sun and are its major components today. According to the Condensation Theory, the formation of planets in our solar system involved three steps, with the differentiation between planet and asteroid formation being a part of the second step.
Step 1: Planetesimals form by “sticky collision” accretion During this phase of formation, dust grains formed condensation nuclei around which matter began to accumulate. This vital step accelerated the critical process of forming the first small clumps of matter, which then start to collide with each other at low velocities. The particles eventually stick together through electrostatic forces, forming larger aggregates of similar types of constituents. Over a period of a few million years, further collisions make more compact aggregates and form clumps a few hundred kilometers across. At the end of this first stage, the solar system contained millions of planetesimals—objects the size of small moons, having gravitational fields just strong enough to affect their neighbors.
Step 2: Planetary embryos/cores form by gravitational accretion The loose, granular structure of planetesimals formed in Step 1 made it possible for them to continue to form more massive bodies through collisional coagulation of “nebular dustballs” and • prevent these small objects from bouncing off by absorbing the object’s energy during collision. The more mass the planetesimals accumulated, the greater their gravitational attraction would be for surrounding objects of all sizes—from dust grains to small planetesimals—until kilometer-sized planetesimals would collide with objects made up of several planetesimals. The result would be that these large planetesimals that were loose aggregates with differing compositions. This gravitational accretion led to protoplanet formation. As the protoplanets grew, their strong gravitational fields began to produce many high-speed collisions between planetesimals and protoplanets. These collisions led to fragmentation, as small objects broke into still smaller chunks, most of which were then swept up by the protoplanets, as they grew increasingly large. A relatively small number of 10-km to 100-km fragments escaped capture to become the asteroids and/or comets.
Step 3: Planetary development When the early asteroids were fully formed, the gas and dust continued to form planetesimals. The system of embryos in the inner solar system becomes unstable and the embryos started to collide with each other, forming the terrestrial planets over a period of 107 to 108 years. The largest accumulations of planetesimals became the planets and their principal moons. In the third phase of planetary development, the four largest protoplanets swept up large amounts of gas from the solar nebula to form what would ultimately become the jovian planets (gas giants). The smaller, inner protoplanets never reached that point, and as a result their masses remained relatively low.
Adapted from http://discovery.nasa.gov/