Is removing it an option?

or make it a niche? On the bedroom side for objets or add shelves. Or on the bathroom side for storage.

What is its function? Why did the builder include it?

If looking for a quick or temporary fix that didn't involve a carpenter, maybe something like this french door treatment. . Do you have any fabric available matching your bed linens...

We stayed in a vacation condo with that type window in the master suite. Immediately over the soaking tub and I assume to take advantage of the gas fireplace in the bedroom area.

I don't know why the builder put it there. I'd prefer to cover it somehow rather than remove it but I'm not sure curtains that go right up against a wall will look good. I originally thought to hang a painting over it but there is no clearance on the right side.

Bookcase? Armoire? A wider shot of the area would help.

But gee, that's weird!

I'll try to get a wider shot tomorrow when I go back. I haven't moved in yet. Just closed yesterday

I don't think curtains or a painting are the best fix, but if you don't want to remove it, you only have a few options. Put up a little rod-pocket cafe curtain or a rtb treatment like morz8 suggested. Another possibility is a decorative screen.

http://www.wayfair.com/70.25-x-52-3-Panel-Room-Divider-011185-CST17010.html

http://www.wayfair.com/Castine-Folding-Screen-4-Panel-Room-Divider-SEHO2001-SEHO2001.html#&gid=null&pid=1

I would probably put a bookcase in front of it.

Opaque and/or appropriately patterned film made to adhere to glass.

Never heard or seen such a thing. The builder/designer HAD to have had a purpose. Perhaps before you do anything you should find out what that is. Is there no ventilation in the bathroom?

No idea why someone would do this. Apparently it's been discussed before on the gardenweb.

Reminds me of the old Right Guard commercials.

If there's no purpose in it, then I'd definitely consider removing it. I like the idea of making it a niche on one side. If it's not in a good location either way, then it's not a big job to remove the molding and add sheet rock, tape and paint. You might also look into putting in a wall safe if you have a need for such a thing as the opening is already there. Depending on what's going on in the rest of the room, perhaps you can hang a full length mirror or buy one of those large mirrors that sit on the floor and lean up against the wall. You may have to remove those door handles though if they stick out too far. Or they old fashioned folding screen is another way of hiding a corner...makes space to stash stuff behind it too.

The closest that I have come to this was a short louver bi-fold door that connected the bathroom with the master bedroom in a hotel we stayed at in Vegas. When closed, you still did not feel like you had privacy in the bathroom.

Does the bathroom have a window, or is this the only source of natural light?

We asked for a different room.

I know that Asian people want natural light whenever possible. My sister bought a house that has a window through a wall in her finished basement. This room has another window but it is small and probably didn't offer enough light for the previous owner.

Maybe it' has a Feng Shui purpose?

I would remove it on the bedroom side. Sheetrock over it. You can leave the bathroom side if it is surround by tiles. On the bathroom side, I like Bpath's idea of shelves or storage.

I would treat it like a glass-front kitchen cabinet with the cute curtains attached. This kitchen designer said: " The linen curtains are installed on mini cafe curtain rods."

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Or, you could get frosted spray paint for glass.

Decorative or frosted film.

Does the power go off a lot? Maybe it's for natural light so you can see your way out?

I would remove it and patch the drywall.

I think that curtains on cafe rods secured top and bottom is the best option other than removing it and putting up drywall. The curtains you choose would need to have the same look on both sides.

I googled just to get the 'why' of this window. It seems ridiculous and ugly to me. Evidently it is a modern and contemporary design feature to get light into a windowless room like this bathroom. Sites I looked at said if privacy is needed between the rooms install a curtain on the bathroom side. Personally I would drywall it away.

could you remove the glass and add a stained glass window in the frame?

Thanks everyone for their thoughts. I think I'm going to put curtains on it like morz8 suggested.