Electronic ink: The whole story in black and white
But why not in colour?
Electronic books are popping up everywhere, but in the quest for colour it's worth remembering that ink isn't just used to print books.
Every time El Reg covers electronic books we get questions about why such devices aren't colour yet, and what's so great about electronic ink compared to other screen technologies, not to mention when compared to old-fashioned liquids? Understanding the technology behind e-ink, and its more-interesting applications, might not make anyone rush out to buy a Kindle but it's not going to do any harm either: so here we go.
Those who've not seen an e-ink display can't get electronic books at all, but many who have seen e-ink at its best still struggle to understand why anyone would be content with a greyscale display and refresh rate measured in seconds. The 20 or so devices that will be on the shelves by early next year will be greyscale at best, because colour is a technical bitch, but the more-interesting applications of e-ink don't need colour anyway and it's those that are going to change the perception of what a computer display is.
The current generation of electronic books are almost exclusively based on technology from E Ink, a company spun off from the Massachusetts Institute of Technology 12 years ago. In June E Ink announced that it was to be acquired by its biggest customer; Taiwanese component manufacturer Prime View International, but come September the deal had to be renegotiated thanks to a growth in demand of more than 250 per cent, combined with reduced production costs, which made E Ink a whole lot more attractive.
The oh-so-valuable E Ink property is based on a series of fluid-packed microcapsules, one for each screen pixel, which contain tiny balls coloured black and white and charged negative and positive respectively. By changing the charge underneath the capsules the balls can be made to sink, or float, with shades of grey achieved by mixing black and white areas within a single capsule.
Reflected light in black and white, image lifted from Wikipedia
The amazing thing about this process is that once the balls have been moved they remain in place without charge being applied, so you can literally smash an E Ink screen and the shards will still display the last thing rendered. E Ink screens can't be back-lit any more than a newspaper can, despite Sony's attempts to fit a side light to one of their readers, the use of reflected light makes the screen more visible the better the light. So it's ideal for reading the latest bonkbuster on the beach but not so good for torch-lit reading under the covers.
E Ink's technology can also be applied to any surface onto which it can be glued, so while most e-book readers are using glass or inflexible-plastic screens there's nothing to stop a manufacturer applying the microcapsules to the back of something more interesting.
Time to upgrade
"You'll be wanting BOOK version 9, then." 
@Trygve - I DONT WANT AN E-READER
Why should I have to buy a whole new computer and all the crap that comes with it - why cant my phone, laptop, netbook... have a (bluetooth) Digital Ink screen so I can read with that. It would be light (weight wise) and do all the things an e-reader does - apart from making someone else rich selling me shit I've already got and probably run for days on a rechargeable AAA battery.
I could have a nice black and white one for now, and colour as I see fit - except the people pushing this have a different agenda.
I have a solution
or at least I think I do. One that also neatly circumvents Charles King (above)'s problem of resolution and Matt Bucknall's opacity problem.
Rather than using black and white charged-balls with no backlight, what's to stop them using black and transparent? Actually, black and white balls would probably still work but you'd need a brighter backlight...
The idea would be that you'd have the e-ink screen suspended over an OLED screen. Each OLED pixel would be the same size as the e-ink pixels- they're a lot smaller so it should be easy. OLEDs have been used in flexible displays as well so there's still no limit to how they can be applied.
The e-ink would permanently show a greyscale version of the image, which would be coloured in by the OLEDs. This would still be low-power as OLEDs are low power and could be set up so only the image-covered portion of the screen was consuming any power at all- and with the refresh rate limitations of e-ink you're not talking about needing super-advanced display controllers.
When power was turned off or the OLED reaches the end of its useful life you'd be left with a greyscale image- perfectly satisfactory for a large number of tasks. However, when you wanted the full experience you'd be able to turn on the OLED backimage- giving you glorious colour and the ability to use it in the dark without a torch.
Such a device would be slim, use very little battery power and cost only a bit more than a normal ebook reader (depending on OLED costs...). Black/White-Fluorescent-material balls could make it even lower power as you could pulse the OLEDs rather than keeping them on all the time.
If using black/clear balls you could always put a layer of paper (or another flat white layer) between the OLED and the e-ink so it goes white when OLED power is off. Or use clear and white so it's either white (i.e. virtual "paper") or see-through(i.e. coloured)/grey/black (the colour of a non-powered OLED display).
Alternatively you could use PLEDs or some other type of really skinny light-emitting system as the backimage
If such a device is now released, you heard it here first... and if you heard it here then built it and made money, please get in touch with some royalties or a job as I'm skint and unemployed...