The human eye is most sensitive for yellow-green light. Take a look at the next gradient for instance:

To me, indeed the green-to-yellow part looks brightest. Not so to Photoshop however.

About a hundred ways to loose the color

Well, maybe not thàt much, but quite a few anyhow. The easiest way (but offering zero control) would be to go through Image > Mode > Grayscale. That’ll give you this:

Your image just became 1/3 of the original size, and that weight loss is caused because there’s now only a ‘gray’ channel instead of a red, green and blue one.
Big drawback of this method, is that it’s destructive: You indeed loose the color: It’s gone for good. Since you also have zero control, I’d never use this method.

Layers

So, we want something that’s reversible. Lots of ways to do that, using (adjustment) layers, but not all of them good… Let’s start off by naming just about the worst way imaginable: Desaturate. What this does, is that it removes all color information from an image, without the option for any user intervention. While that may or may not be important to you, this should be: All colors are treated as if they were equal.
While equality is a great thing, in this case, it isn’t, since to us different colors aren’t equal.

What does Photoshop see?

Simply put: Numbers. If you’d open the above color gradient in Photoshop, the eye dropper will show you what it’s made of: A simple gradient in each channel. The image below shows the channels:

To understand what Photoshop sees a bit better, have a look at the info palette, and in particular the HSB values there. The only thing changing there is the hue angle! Saturation and Brightness remain at 100 percent in the entire gradient.

Not vastly surprising then, that this is what you get when you do a ’straightforward’ desaturate:

Hue and Saturation are at 0, Brightness is at 50 percent. This might be correct “by the numbers”, but it’s not what I’d want for making a nice black and white image…

A better way

As with most things in Photoshop, there’s plenty of ways to convert a color image to a grayscale. I’m going to show a few here that do a better job then desaturate, and offer more control then ‘Image > Mode > Grayscale’.

One simple way would be to use blend modes: Duplicate the background layer, desaturate the duplicate layer and set the blend mode of the top layer to color.
This can all be done using keyboard shortcuts: Cmd+J, Shift+Cmd+U, Shift+Opt+C, so is very quick.
Disadvantage of that method is that it doubles the file size.

Photoshop is acting more then a bit goofy here by the way: If you desaturate the top layer, you essentially fill it with medium gray. However, if you create a new layer and fill that with medium gray (or black or white or whatever shade of gray in between) by using the fill command, the file size does not double. Very weird indeed.

So the fastest way to go black and white without doubling the file size would be this: Shift+Cmd+Opt+N, Cmd+Backspace, Shift+Opt+C.

Control

All nice and fast, but this doesn’t give you much control. So let’s try a different method. Make a Hue / Saturation adjustment layer. Set saturation to 0. Now you have the uniform gray image of the example above. Now, set the blending mode to ‘Color’ (Or Hue, or Saturation. Doesn’t matter in this case.) Same as when you use that blend mode on a layer filled with pixels! Yet still no control.
To get control, add another hue saturation adjustment layer between this one and the background image. Set the blend mode to ‘Luminosity’. Do not touch the Saturation slider here however. Instead, use the ‘Hue’ slider to alter the grayscale image.
The example below shows the effect of a shift in hue of +40:

Alternatives

As said, in Photoshop there are more ways to do this.
You could for instance just copy the contents of one channel into the image. What works better then that, is to use either the ‘Calculations’ command or, more flexible and a bit easier to understand, a Channel Mixer adjustment layer.
Tick the grayscale box there, and PS will default to these values:

You can then drag any slider to wherever you want, creating the type of black and white image you want. For instance for a portrait, using more red will result in lighter skin tones, using more green will give more contrast… As can be seen in the screenshot, Channel Mixer will warn you when the total of channels goes over 100 percent. However that does not mean that you must never go higher. Depends on the image really… The Histogram is your friend here.

The two gradients made with channel mixer: First default setting, then the altered setting:

Channel mixer has the strangeness that if you untick the ‘Monochrome’ box, the values for all channels stay at what you set (83, 24 and 5 percent in the above example). If however you then tick the ‘Monochrome’ box again, you’re back at the default values! Not the brightest decision Adobe ever made I think.

New to CS3

In PSCS3, Adobe introduced the ‘Black and White’ adjustment layer. It’s quite a bit like a Channel mixer, but is adjustable for 6 colors, instead of 3 channels. So it offers more control (and more options for the user to screw up).

Apparently, someone at Adobe must have been watching Spinal Tap, since the sliders of this adjustment layer range from -200 to +300. ‘Goes to eleven‘ indeed. For the adventurous: There’s also an ‘Auto’ button.

New to CS4

In PSCS4, Adobe included the new ‘Vibrance’ adjustment that was first introduced in Lightroom and ACR. That adjustment also features a ‘Saturation’ slider.
If you use that slider to desaturate an image, it quickly becomes clear that this is working different then the ‘Hue Saturation’ adjustment. You could say it’s actually working nice.

This is whet you get if you drag the Saturation to -100: A contrasty version of what you get using ‘Channel mixer’.

Some tips

If you set any of these adjustment layers to blend mode ‘Color’, you get the exact same result as in the above example with a gray pixel layer set to blend mode ‘Color’: A standard B&W conversion.
This can be useful as a quick way to compare your conversion to a ’standard’ grayscale conversion to see if your version is actually better…
Blend mode ‘Color’ will also work for a ‘Solid Color’, ‘Gradient’, ‘Gradient Map’ or ‘Pattern’ adjustment layer. While I cannot think of a use for ‘Pattern’, the first two work similar to a gray pixel layer set to ‘Color’, while the third offers interesting possibilities. Maybe not what you’d want for your average, day to day grayscale conversion, but nice to experiment a bit.

I leave you with an example of that: A ‘Gradient Map’ adjustment layer, using the preset ‘Copper’, then set blend mode to ‘Color’, on an actual photo: