With Python 2.6+ you can just do:

echo '{"foo": "lorem", "bar": "ipsum"}' | python -m json.tool

or, if the JSON is in a file, you can do:

python -m json.tool my_json.json

if the JSON is from an internet source such as an API, you can use

curl http://my_url/ | python -m json.tool

For convenience in all of these cases you can make an alias:

alias prettyjson='python -m json.tool'

For even more convenience with a bit more typing to get it ready:

prettyjson_s() {
    echo "$1" | python -m json.tool
}

prettyjson_f() {
    python -m json.tool "$1"
}

prettyjson_w() {
    curl "$1" | python -m json.tool
}

for all the above cases. You can put this in .bashrc and it will be available every time in shell. Invoke it like prettyjson_s '{"foo": "lorem", "bar": "ipsum"}'.