I'm absolutely thrilled with my Amazon Kindle. I read it every night and have probably bought a dozen books with it, several newspapers and I read many dozen PDFs. I own the standard-sized Amazon Kindle 2 - it's the little one in the picture on the right.
The Kindle 2 is 8" x 5.3" x 0.36" but the screen is 6" diagonally. It's got a 600x800 pixel display, so that's 167 dpi with 16 grays. As a comparison, you monitor is likely 96dpi, possible 120dpi. An iPhone is 163 dpi.
The Kindle DX is 10.4" x 7.2" x 0.38" and the screen is 9.7" (yes, nearly 10"!) diagonally. It's spendy, but the screen is MASSIVE. That's 1200 x 824 pixel resolution at 150 dpi. It's got 4gig internal storage which I've found is effectively unlimited.
The screen on a Kindle is EXTREMELY clear. It's not backlit and it's not an LCD. It's e-ink and it's totally unique when you see it. It's very very close to paper and once you've started reading you really do forget it's not paper. There's zero eye strain, or no more than a regular book.
Let's get serious on size and layout here. The real tragedy of the Kindle is the bezel. That's the space between the screen and the edge. I don't know what the technical limitations are and I don't really care. There's just WAY to too much "whitespace" between the edge of the kindle and the screen itself. It's distracting and it's wasteful. There's easily enough room on the Kindle 2 to make the screen a 7" screen just by tightening up that space. Also, the keyboard on the Kindle 2 uses far too much vertical space.
Here's a screenshot taking from the Kindle 2 of a book. Notice that it starts with the word "morning" and ends with "duration, so the."
Here's the same book, same point, starting with "morning" on the Kindle DX. The "so the" appears right in the middle of this screen. Effectively you can fit double the text on the page of the Kindle DX.
Also, the Kindle DX has native PDF support. That means you can just plug it in over USB, copy a PDF and boom, you're viewing it. It works for 95% of PDFs, but every once in a while I've had it fail. Rare, and usually it's because there's some advanced PDF feature being used that the Kindle doesn't support. The failures have only been on internal documents that have annotations and stuff. I don't know what the real limitations of the PDF support are, but I'm sure they're improving it constantly, and the Kindle can update it's OS over the 3G network, so those updates will presumably just happen.
Here's a screenshot of a PDF taken from the Kindle DX. It's totally readable. It would be totally NOT readable on the non-DX Kindle for two reasons. First, no PDF support built in, and two, if it was converted to Kindle-format, it'd be destroyed.
In English, this means if you're wanting to read technical books, you get a Kindle DX. Period. The small-size Kindle 2 is fantastic for prose and horrible for charts, graphs and code.
If you're torn between the two, it's understandable. After having used both for a week, I am also. The Kindle DX is too big and the Kindle is too small. By too small,I mean, the Kindle should have the SAME size and a larger screen. I could totally see another Kindle that's in between sizes, but I know that'll never happen, which is a shame.
If you're interested in a Kindle, and you read a lot of PDFs or non-Amazon eBooks, get the Kindle DX. If you read fiction and rarely, if ever, need PDF support (or only need the basics) then get the little Kindle.
While the DX is large, its PDF support is so nice that I'm compelled to prefer the DX over the little one, for myself.