Many times (especially around midday), we encounter lighting situations where the contrast of the scene is too high to capture with a camera. What can we do to create a useful picture in such environment, besides completely blowing the highlights or shooting a silhouette?
Here, I went with the sky.
As others have stated the main options are fill flash or multi exposure. I thought I'd post this handy example I shot recently where I tried both techniques:
This is the result of using fill flash:
The flash was off camera and to the left, near the ground. I was intentionally trying to get a very dramatic lighting effect, had I used the flash on camera the shadows would be less dramatic and the light more even.
This is the result of two exposures manually merged into one file:
The fill flash shot is more effortlessly natural looking but the multi-exposure (or HDR if you prefer) definitely has more detail and is more striking. It's worth pointing out that whilst I could have done better with the flash I could also have done better with the exposure blending, this is just a quick job to prove a point.
In general the pros and cons of each method are
Fill flash
Multi-exposure (HDR)
This last point is worth expanding on. In my example the subject isn't being lit by direct sunlight. So where is the light coming from? Some of it is from other parts of the blue sky (refracting of particles in the upper atmosphere and turning blue), a small amount is bouncing off the clouds (which had almost gone by this point) but a significant amount of it is bouncing off the green grass in front of the subject.
If you boost the shadows too much using HDR, you can get colour shifts, as the shadows by definition aren't lit by direct light, only by light that has already bounced off other surfaces and picked up their colours!
The obvious (in the particular example you gave) is to use a fill flash. Then, I'd shoot RAW so I can preserve more tonal information for working on in post. Last, comes HDR, but I never did that myself. In the case of too bright skies, you can try to use a polarizer to reduce the amount of light from the background while still keeping the details (and even enhancing its looks).
If you can control the scene itself, move the subject to a different place maybe, where it is more lit and thus reducing the exposure difference to the background.
Fill flash can work although you should try and use a gel to balance the color of the light with daylight...
I am partial to reflectors, because then you are using the same light. Even just a small one might have worked for the shot you were taking there.
Also make sure to meter to the right, and as ysap noted use RAW... push the exposure as far to the right as you can and then you can usually recover a good deal of shadow detail using Photoshop or other editing tools.
Depending on the scene, another option would be a graduated neutral density filter. For landscapes, in particular, this would allow you to decrease the intensity of the sky while maintaining intensity for the foreground. There are various strengths available, so the amount of filtering will depend on the actual scene, time of day, etc. This works well when the dividing lines are relatively even and can be lined up with the filter.
For the example you gave, as others noted, it's a classic fill situation for a flash which would have no effect on the background, but would light the subject. Alternatively, a reflector can be used to direct the light on to the subject, a very common technique for staged shooting outdoors, but in most cases I'd suspect that you're more likely to have a flash available than a large reflector. Mind you, any light surface can potentially act as a reflector, so you don't necessarily need to a store bought one to pull it off.
This is my attempt to summarize various ways this can be handled:
You can reduce the contrast by lighting up shadow areas by fill flash (on- or off-camera). This required having a flash, and if you use on-camera one the resulting areas (faces) may look a bit flat if on-camera flash is the only light source. You also may run into color correction issues (neutral daylight flash vs. slightly orange evening sun). See Matt's answer for example.
A well-positioned reflector can light shadow areas with reflected light of your main source. For this you need a reflector and something/someone to hold it in place. [Kendall]
Sometimes it's best to change the scene completely and perhaps shoot a portrait in the shadow instead of in the midday sun. Or wait for more favorable time of day. [ysap]
Especially in landscape photography, a graduated ND filter can be used to darked top part of image with bright sky. [John]
Shooting RAW might help use more of your sensor's dynamic range and later use some of the in post-processing. [ysap]
Finally, you can shoot several pictures, and combine them into one tone-mapped HDR photo. This can be done either manually or with various automatic tools and settings. Matt's answer provides a tone-mapped alternative to fill-flash photo.
What can we do to create a useful picture in such environment
Although this question has a community wiki answer, I want to explore a bit more the topic and categorizing it.
Middle day is probably not the real situation where you have a background-object contrast. This situation is more feasible during dusk or dawn, or on an interior-exterior scene. Midd day will render high contrast shadows on the same object.
I will separate the idea into some fields. Some are more feasible on real midday sunny situations, and others in dusk or dawn, and other in interior exterior ones.
I. Work with the environment
Be creative. Blowing up the background or using silhouettes is one way to do it. I must add that a high contrast image can be "a usable" one, so keep doing them.
Some other ideas can be making the image black and white, where high contrast is more often appreciated.
Explore weird compositions when this contrast is the main subject. Dutch angle works well on abstract photos.
Change the white balance, the saturation, make some abstract images out of the camera.
II. Reduce the shadows
If your subject is a person-like subject, a portrait, for example, the easiest way is using a reflector, a white, plate or silver one. Try not to harm the person eyes reflecting bright light into them.
You can use the surroundings, probably moving the subject some feet will give you the reflection of a wall.
You can use fill light, either continuous or flashlight. You need to explore some techniques when using flash with ambient light, especially if you want to use a wide aperture, where you additionally could need either neutral density filters to reduce the need of high shutter speed, or using a high-speed flash.
Use ambient, natural and artificial light. If you are indoors, try to turn on some other lights that you did not considered, try to open and close some door or window.
III. Decrease the light
Moving a subject from the direct sunlight to shade, for example under a tree is the classic example.
But you can construct a really big diffuser and hold it above the subject. Use sturdy but light materials so accidents are avoided. You can have two assistants holding a translucent fabric above a model for example. This diffuser can be a white one, to act like a really big softbox.
On interiors, you can probably close a curtain.
There is a technique where on an interior-exterior scene, instead of putting very bright lights to illuminate an interior to fight against the bright of the exterior, you put a really big black stretchable fabric on the exterior. Stretching and collapsing this fabric make it more or less transparent.
The use of graduated ND filters goes into this category.
IV Combine both
Using a higher dynamic range on a single shot, for example using RAW instead of JPG, and editing the image using curves.
Using some HDRI tone mapping techniques, multiple shots combined. This works better on static subjects, like architecture, especially on interior exterior situations.
Being creative on a final project, for example using your high contrast image as a mask instead of as the main image. Take a look at this post: Double exposure photo with Gimp
