TL;DR lots of people do cash and fail to declare the transactions to avoid taxes. This ends up accruing in the Rs 500 and Rs1000 notes that have now been declared void as of midnight. This is in the wake of an amnesty period where you could make a large cash deposit into a bank but would be taxed on it. There are provisions for turning in the old notes but I'm guessing huge transactions are going to be followed with either an audit or a larger tax then that offered during the amnesty period. Random internet commentary seems to indicate a pretty large hit to the property market.
Any other governments ever do this? I guess there is something to be said by pushing digital in that it cuts down on parallel economies.