I've had a kindle 2 for several months now, having acquired it a little bit before the DX came out. I love it, but I also acknowledge it's too expensive for what it is, and the future of DRM'd books is enough of a crapshoot as to make it a very expensive gamble. I generally encourage people not to get one unless they have very specific needs. If you read a lot of books, often multiple books at once, and do so in unpredictable places (either just randomly or because you travel a lot) then you should consider it. If the books you read are predominantly fiction or entertaining non-fiction (as opposed to reference books) then it's probably a good match, but even then consider the price.
If you shop through amazon, odds are good the savings on buying kindle books will often be very slim - in many cases it is less than a dollar - so while you'll see some savings over time, it's going to take a long while before you make up the cost of the reader. Someday an e-reader might be a good way to save money on books, but we are very much not there yet.
All that said, we are getting closer to the point where it is worth giving an e-reader some serious thought. For all it's faults, the kindle represented Amazon's commitment to the idea of ebooks, and that gave the whole idea a shot in the arm. For all that these new and interesting readers are starting to come out, looking to be a kindle killer, never for a second underestimate just how profound the impact of the kindle was. Ebook and e-readers have been around for more than a decade, and the barriers to their success have not been technological. E-ink has offered some improvements in battery life and readability, but it has also traded away functionality that older readers took for granted. And ebooks are not large files - for all that ubiquitous wirelessness improves the experience, transferring books was something that worked just fine in a dial-up world.
Having that kind of commitment to the device and to the idea of ebooks created a market. Without the kindle, the sony ebook would have been a curiosity that sat in its technological corner and gathered dust. By making the market legitimate, it opened the door to competition, and now we find ourselves looking at the devices which are responses to the Kindle. Most of them are pitched in terms of offering something the kindle lacks, which kind of reflects the real state of the market, and several look interesting. Sony is gong to offer a smaller reader, which intrigues me but leaves me skeptical and combination devices like the entourage edge offer a promising look at a potential next generation path, but most of the interest at the moment is on the Nook.
The Nook is Barnes & Noble's answer to the Kindle, and is firmly positioned in response to it. There's a lot of attention given to the inclusion of a color touchscreen for navigation, but I admit that doesn't impress me much. It's going to look cooler than the Kindle, and I suspect it will make navigating your library much faster (since you can scroll through it all rather than go through it a page at a time) but I would dread trying to use it for navigation and typing. It's not that the kindle's particularly awesome at these things, but for some things you just want a hardware keyboard.
No, what's really interesting is the capabilities of the nook.
First, it has wifi, Some people are excitedly hoping this might open up, but I wouldn't hold my breath - this function is not for web surfing, but rather for something kind of cool. If you're in a barnes & noble, you can read books over this connection without buying them. It's a "browse" function which is kind of awesome in theory, though in practice I think it just means finding a space in the café just got that much harder.
Second, it supports many more formats than the kindle. I won't go into the weeds here, but there are several formats for ebooks, and the Kindle only supports a tiny slice of them. When people talk about other readers being able to get content the kindle can't, it's mostly bullshit, but sometimes (as in the case of library loaning) it's because it depends on a format the kindle doesn't support.
Last, and perhaps best, it support book loaning. You can send a copy of a book on your nook to a friend for two weeks. You can't read it for those two weeks, and when time runs out, it disappears from their nook and appears back on yours. I cannot stress how INSANELY awesome this is. One of the greatest problems with the kindle is the lack of social element. There's nothing I love like loaning a book to a friend, and the kindle takes that from me. This (combined with the fact that B&N's goal is to make their books readable on every piece of technology under the sun) could be a killer app.
But it won't be. See, what's kind of fascinating about these differences is that, excepting the wifi one, they're all software driven. The kindle or any other wireless reader could do the same thing with a patch. My big hope is that the nook will be popular enough to force Amazon to actually do that. And it might happen, but I'm a little skeptical. For one thing, as far as I can tell the market for the nook is "people who would have bought a kindle, but don't like Amazon". I mean, they exist, but that's not a huge market. B&N _might_ be able to do a strong upsell through their stores, but that feels like a crapshoot, esp because even if B&N embraces the ebook, that doesn't mean every employee will.
But I'm still optimistic. I think a competitor would have to come up with something drastically better or cheaper than the kindle to unseat it in the short term, but over the long term the hounds might wear down the lion, forcing it to either give up its throne or (more likely) transform to adapt to the realities of this new world.
1 - In the last generation of ebooks, one of the most promising companies basically destroyed themselves by deciding people wanted an ebook reader the size of a Palm Pilot, and added extra functionality. The result was, basically, a more expensive, less useful palm, and unsurprisingly they didn't sell. That this was evidence that there was "No market for ebooks" enraged me for several years.