Here's the official rundown on the Nook.
The Nook connects to Barnes and Noble's digital store to sell e-books. When the Nook was first released, it was promoted as having a color touchscreen and the ability to lend some titles to friends for a brief amount of time. Users can also connect with the Nook at Barnes and Noble's brick-and-mortar stores, where they can read books for free for an hour a day.
DRM
The Nook's book selection comes with its own brand of DRM in eReader PDB (sometimes known as Secure eReader format), but also gives ePub file with B&N's DRM when ebooks are downloaded to the device at the bookstore or through a friend with the device. Adobe has developed support for eReader PDB in releases of its product for letting other devices use that format, called Adobe Reader Mobile.
The Nook supports other file types, including PDF files (with and without DRM), ePub files, all image-file formats, and MP3 and Ogg Vorbis audio files for music and audiobooks. Files in other formats cannot be read without hacking the firmware.
On top of the "LendMe" feature that lets users share some books once with other users for up to two weeks, the Nook also has an app for other devices to read content from its library.
Marketshare
Nook has made a small place for itself in the market, nabbing about 4% of the e-reader market in a recent survey. Barnes and Noble hasn't been sharing much sales data about e-reader devices, but did say sales on their website boosted by the Nook were up to $145 million last August.
Conclusion/Review
Unfortunately, Barnes and Noble opted to introduce another confusing DRM format into the cluttered mix of other formats, but does offer the ability to read ePub at least. The exclusion of some formats (like DOC and HTML) is strange, especially since the Nook is one of the newer major players in the e-reader market. Nook runs on Google's Android platform, meaning it is possible to hack the device into doing functions other than reading books (at least made easier than other devices's ability to be hacked). The ability to lend books to other Nook users is a definite plus, as is the ability to read for free titles at your local Barnes and Noble store, provided you live near one.
Nook's entrypoint into the market represents a transition from "just an e-reader" to the potential to be a smaller tablet computer on par to compete with the iPad by running on the Android platform. Hopefully, this functionality will improve its dent in the sales of its e-readers.