PMI stands for "Private Mortgage Insurance". However, don't be fooled by its name. It is entirely for the benefit of your lender so that THE LENDER may recover their money in case the client defaults and there is still a balance after the foreclosure sale.
In most cases a lender requires PMI from clients that did not have 20% to put as a "down payment" on their home and/or from clients that are considered "high risk" for any other reason.
The Lender is required by law to drop PMI after your loan payments have reached the equivalent of the 20% downpayment or your house value has grown. In the past it was the clients responsibility to notify the lender when they reached that point and overpaying PMI was not unheard of. In 1999 a new Federal law made that responsibility mutual.
However, the law has many "exceptions" and the lenders will always err on what's best for them. therefore, I advise my clients to keep an eye on their requirements because it could save them $400 or more per year.
Without getting into too much "industry lingo", the bottom line is that you're supposed to stop paying for it at some point.
Just using your payments (and whether or not you "overpay" your loan) as a guide it could take you 10-15 yrs to get to the 20% "threshold", but even with this housing market slump there are some areas that are still gaining some value at a low percentage anually. You can reach that 20% much faster than the Lender is willing to admit with a combinacion of your payments and market value gain.
Check out this site from the Federal Trade Commission that discusses PMI in more Detail:
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