All of the sudden, we have three majorly cool e-book readers to choose from this holiday season: the Amazon Kindle 2 , the B&N Nook , and Sony's Reader . And there are even more on the way: devices from like the Que  and the Readius  are looking promising, too.
Just two years ago, there was just one: the original Kindle, a quizzical little wedge that--for most of us--cost too much and did too little. Before that, e-books were ten-year-old mythical vaporware. In 1997, some MIT Media Lab nerds announced they'd created something called e-ink, which every major e-reader on the market now uses. It wasn't until the Kindle that we saw a really practical use for it.
E-ink is like a peanut butter and jelly sandwich that can change state when you zap it. The pixels of an e-ink screen are actually millions of tiny "microcapsules" about the diameter of a human hair. Each capsule contains two kinds of particles: black ones, the jelly, which are negatively charged, and white ones, the peanut butter, which are positively charged. They hang there in a clear fluid substrate--yep, fluid--and when small amounts of electricity are applied, the orient one way or another. Zap in the correct pattern, and you get a white background with some black text. (Refer to diagram below.)
This technology is particularly great because once you deliver the initial zap, the e-ink stays in whatever position you've zapped it into. Unless you're hitting the buttons and actively changing the state of the screen, e-ink uses no power. That's why Amazon can toss up a picture of a famous writer when you turn "off" your Kindle. Until that image is zapped into changing, Shakespeare isn't sucking any battery power.
Once MIT's e-ink inventors realized what they'd hit upon back in the 90s, they started a company: E Ink  Corporation . It was subsequently purchased by another company, Prime View International, for $215 million in June of this year.
Like lots of other major computing developments, this brilliant technology--which is now formally called "electrophoretic display "--can be traced back to Xerox in the 1970s. This was around this time that Xerox was also thinking of neat things like the computer mouse  and the GUI  that has since evolved into Mac OS X, and the company was using its new Palo Alto labs to develop low-power displays. Back then, they used a slightly different formula than modern-day e-ink, but it was electronic paper all the same. They named it "Gyricon," which in hindsight seems more evocative of feminine hygiene than anything else. Let's all be thankful the name did not stick.
Though most of us probably only learned about e-ink in the last year or two, it hasn't just been limited to e-book readers. In fact, it was the central component to a nifty little cell phone that Motorola made in 2006 dubbed the MOTOFONE . The FONE was a candybar-style device meant for developing countries; its clear priorities were durability and economical power usage, since presumably it was to be used in areas where electricity might not be reliable.
The FONE was the first phone to use an e-ink display, and the resulting device was both longer-lasting and cheaper than traditional glowing LCD phones. That said, it only displayed six lines of text, making it not-so-useful for now-popular stuff like text messaging. (It also couldn't show some punctuation marks so well--the question mark and @ sign looked particularly gnarly.)
Just a year before, in 2005, Seiko announced they'd be using an electrophoretic display in a new watch called the SVRD001 (pictured below). The curvature (and waif-like 37mm profile) of the device emphasized that e-paper was flexible and technically elegant. The price-tag ($3200) and the production run (500 units) emphasized that e-paper was still very much an experimental technology.
Modern experimenters are well on their way to making color e-paper with controllable hue and saturation , and improvements in super-thin "organic" flash memory  promise to make future e-readers as svelte as that Seiko watch. Until then, we're stuck with our current crop of readers--and a publishing industry that hasn't entirely figured out how to make the transition  from paper to binary.
If you're ready to take the plunge, the best of the devices so far is probably Sony's line of Readers. This one (below) is the Touch Edition. As you may have guessed, its big selling point is its touch-sensitive screen. (The Kindle, by comparison, uses a hideous and awkward physical keyboard.)
The forthcoming Daily Edition  looks the most promising of the Sonys, with a 3G radio, big screen and touch-sensitive display. I've been using the above Sony Reader back-to-back with a Kindle for several weeks, and for me, getting Google books  (which are free and multitudinous) is just too sweet a deal to pass up. Thanks to its open e-pub format, Sony has them, and Kindle doesn't. Sony's iTunes-like desktop software , for both PC and Mac, is also surprisingly great for buying new titles. Plus there are a few color choices.
More Undead Tech:
- The Smartphone Projector 
- The Smart Printer 
- Apple's Magic Mouse Has Trackball Bad-Assitude 
- Apple's TV Macintosh 
- The Wrist-Mounted Cell Phone