The Kindle uses
e-paper, which is essentially a densely-packed array of tiny beads that are black on one side, white on the other. Each tiny bead is one pixel, and it just flips from white-side-up to black-side-up when the pixel is "on." It requires no power to remain in position once set, hence the very low power usage over time.
It's got very good contrast and is much easier on the eyes than LCD, but it isn't backlight-friendly due to the opaque materials used.
I think it would be super-cool to just have a basic page of e-paper with a wireless/bluetooth connection, modest amount of onboard flash memory (~1GB) and a scrollbar. It would be an inexpensive, portable, passive reader... much like a magazine. It wouldn't be intended for any long-term storage... just upload a bunch of reading and clear it off when done. But that is unlikely to happen with DRM gumming up the works, and with places like Amazon trying to marry their devices to their online stores.