A netbook is a somewhat old laptop paradigm that became very successful in the last year and encompasses a small sized body that's light-weight and usually low-cost.
The first small laptop can be traced back to the '90s, with some of Sony's Vaio laptops in 1999/2001 also earning the name, but it wasn't until Taiwanese hardware manufacturer Asus released their "Eee PC" for just $299 in late 2007 that this market exploded. A number of new manufacturers stepped up to the plate to compete with the Eee PC series: Acer with its Aspire One, MSI's Wind, Dell's Mini9, HP's Mini-`Note, and as of early 2008 a number of Chinese no-name manufacturers too.
Netbooks usually weigh between 2 and 3 lbs with no optical drives. Aspect ratio is 16:10 and resolution varies from 800x480 to 1024x600, there is always WiFi connectivity, SDHC slot and solid state drives are often used instead of hard drives. The biggest netbook belongs to DELL and it's a 12" laptop, at 1280x800 resolution, and 2.8lbs ($999). One of the smallest ones is the 7" Eee PC 701, under 2 lbs and resolution of 800x480 ($299). Bluetooth is not always a standard option, while 3G GSM SIM slots have only now started to become more common.
Originally, the Intel Celeron M processor was used (usually underclocked to 600 Mhz), while some Chinese manufacturers even used an ARM CPU which is usually used only for embedded uses. The second generation of the modern netbooks didn't take more than 6 months to appear in the market and use the Intel Atom processor. Since then, Intel introduced the second generation of the Atom CPU. While it is more powerful, its accompanied motherboard chipset only supports up to 1 GB of RAM (whereas the older generation of Celeron/Atom did not have this limitation). This has created criticism among enthusiasts and some say that Intel did that on purpose so their Dual Core desktop CPUs don't lose their value.
The solid state drives (SSDs) used in Netbooks usually have between 4 and 16 GBs of storage, and when more is needed, an iPod-sized hard drive is used instead. While solid state has theoretically fewer fail problems than hard drives, they are much slower, and operating systems are not fully optimized to not wear out the SSDs, so SSDs are not considered to have a clear advantage yet.
The operating systems used in netbooks are usually Linux and Windows XP. Windows XP is usually installed "as is", but the Linux versions (except in Dell's netbooks) are highly modified from the popular desktop versions of Ubuntu, Debian or Fedora. They sport a simpler, web-targeted interface, and while that interface fits better on these small displays, usually they don't support third party packages. Therefore extending the software is often impossible. This leads a lot of power users to either go back to Windows XP, or install Ubuntu to go around the "canned" versions of Linux offered in most of these laptops.
Performance is good for normal browsing and emailing, but much of everything else is usually slow (especially on SSD and non-Atom based netbooks). As for battery life, there aren't many of these netbooks that will do more than 4 hours on one charge. Despite this, netbooks are extremely popular for their extreme portability, relatively low prices, and "cool" factor. The industry expects millions of these to be sold every year and so far, the market response have been enthusiastic.