The Westermarck Effect is a hypothesized psychological response of people who are raised together in a family unit from a very early age, which desensitizes them to sexual attraction towards said person.
While it remains commonly cited in pop-culture, Science Marches On, and these days its validity is contested. It's often mentioned alongside the (likewise poorly evidenced) idea of genetic sexual attraction.
In short, the Westermarck Effect holds that you're less likely to be attracted to someone of your preferred gender if you both grew up together. The Westermarck Effect is commonly brought up in the midst of
shipping arguments shipping discussions where siblings and childhood friends are involved. Many close tribal and small village communities marry outside of the tribe or village, and many childhood friends end up unlucky because of this. This would also explain why brother-sister incest was possible among Egyptian royals (where the girls were raised separately from the boys and didn't even meet until after puberty), while some European royal families such as the Valois faced extinction because the king and queen couldn't bear to touch each other—not because they were that closely related, but because they'd been brought up together since early childhood and thought of each other as siblings.
The Trope Namer was Edvard Westermarck, who first described it in his 1891 book The History of Human Marriage.
The most famous case supporting the Westermarck effect was the Israeli collective farms (kibbutzim), in which children were raised communally in peer groups based on age rather than biological relation. One study showed that out of 3,000 marriages that occurred within the kibbutz system, only 14 were between children from the same peer group. These 14 were seen as the exception that proved the rule, since none of them had been reared together during the first 6 years of life.
A later study (2009) by Eran Shor and Dalit Simchai noted that while there were few marriages between kibbutz children from the same peer group, they found that a significant number felt attracted to their co-rearer peers. Basically, kibbutz children rarely married each other, but they frequently had crushes on each other. Shor and Simchai concluded that the kibbutz system provides weak evidence for the existence of the Westermarck effect, and that social taboos and norms are necessary factors to consider.
Indeed, people are taught by religious, legal, and medical authorities that sexual relations with one's sibling are sinful, criminal, or a form of mental illness. Even if attraction is felt, it will probably be repressed, especially if the one experiencing it thinks it is one-sided.