I got a chance to catch up with the folks from Pixel Qi this morning. If you’re not familiar with the company, it was founded by Mary Lou Jepsen, one of the designers of the original XO Laptop. And Pixel Qi makes LCD displays that are unlike any you’ve ever seen. When you turn the backlight off, the screen is still readable in a high contrast black and white mode. They actually look like e-Ink displays, but they’re not. Turn up the backlight, and you have full color saturation.

The net effect is that you can put a Pixel Qi display in a netbook, tablet, or eBook reader and have a device that you can read indoors or outdoors. It can handle full motion video. And there’s non of that page refreshing effect that you experience with eBook readers like the Kindle and Nook.

One of the other side effects of using the Pixel Qi display is reduced power consumption. In full color mode, the LCD uses about 2.5 watts of power, which is about what you’d get from any other LCD screen. But when you cut the backlight off, that drops to about 0.5 watts.

The image above shows a standard off-the-shelf Lenovo IdeaPad S10-2 that’s been retrofitted with a Pixel Qi display. While there are no plans to sell this particular model, I was told that you can get about an extra hour of battery life by using a Pixel Qi screen in high contrast mode with the backlight off. If you were to put the same screen in a low power ARM-based smartbook or tablet that only uses 7 to 8 watts of power total, then you could see as much as a 30 to 40% increase in battery life by using a Pixel Qi display.

The company is also working with vendors on technology that will allow the CPU to idle when you’re not using the computer to do anything but look at text. There’s no reason to constantly redraw each pixel if you’re reading an eBook or a web page.

There are apparently 6 different companies showing off devices with Pixel Qi screens at CES this week, but most of them are holding private meetings and Pixel Qi isn’t saying who’s got what.But the product categories range from netbooks to tablets, and possibly some other devices. If I see any actual products on the show floor, I’ll be sure to let you know.

Pixel Qi expects to ramp up production this year to the point where it can pump out millions of displays. Most of those will be sold direct to vendors who will then bring out products using the screens. But the company is made up of DIY tinkerers, and does plan to throw a bone to the DIY community by making the screens available to end users. I was told we can expect an announcement along those lines next week.

Want to know what that image at the top of the post looks like in full color mode? Check out the color version after the break, as well as a handful of other pictures showing the New York Times Reader application and video playback in VLC. I’ve also uploaded a short video of the S10-2 with a Pixel Qi Screen.

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