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This is a very common childhood injury, also known as subluxation of the radial head. It typically happens when a toddler's elbow is hyperextended (bent beyond the fully straightened position) in the course of roughhousing with Uncle Jack or especially when Mom is hurrying along, toddler in tow, and Precious decides to sit down all of a sudden and have a tantrum for that shiny toy on the shelf. In so doing, she overstretches a ligament in the elbow that gets caught on the wrong side of the bone. The head of the radius slips out of position (it is "subluxed" as well).
To have the ligament out of position is rather painful. Your child will not want to move the affected arm; she will hold it straightened, down at her side, with the palm facing rearward. Typically, parents assume the wrist is injured since the child keeps the affected elbow stable by holding the wrist down at the side with the other hand.
The treatment is simple for the experienced pediatrician, and often does not require xrays. A simple maneuver of the elbow results in prompt relief, usually with a "snap" felt in the elbow as the ligament pops back into proper into position. Within a few minutes, your child will be moving the arm normally as if nothing has happened. Your doctor will probably warn you to be careful with the arm for the next few months. Once the ligament has been stretched, it is more prone to pop out of position in the future.
There should not be any swelling of the elbow, or persistent pain beyond a few hours of soreness (this seems to depend on how long it has been dislocated). That would hint at a more serious fracture of the elbow (especially a "supracondylar fracture" of the humerus), and require xrays and perhaps orthopedic consulation. Let your doctor know if the nursemaid's elbow seems to bother your child more than just overnight.
Because of the stretching of the ligaments involved in this injury, there is a high rate of reoccurrence of nursemaid's elbow - about 25%. So for the next few months after the injury, be particularly careful not to over-stretch the injured elbow.