
Make Magazine has some good photos and details (including links to high resolution photos) of the physical elements that went into that cover, including chips and 2 e-ink screens.
Here's a video of that cover (click on "HD" at bottom-right of video for a better look -- a big investment for a small effect!, but definitely different and the jaded crowd commenting on Gizmodo and Flickr were impressed. Esquire challenged the engineering-inclined to hack the cover.
There's also a video of it on newstands, blinking away :-) Now I remember seeing it and wondering, briefly, what on earth that was.
Esquire has a page mapping out how this was all put together, distribution-wise, across the world, starting from its being, yes, "Made in China."
Why the cover? Esquire explains: "...we created the special cover to demonstrate a revolutionary technology that will change the way we all read paper magazines in the years ahead." The idea for the cover started 7 years ago when Esquire visited E Ink, a startup in Cambridge, Massachusetts, whose managing partner, the Nicobar Group, is in Shanghai.
The beginnings: as described in a piece written in 2002 and titled "The Next Gutenberg." Joseph Jacobson (MIT), a founder of E Ink, called the new 'paper' "Radio Paper" and the Esquire writer points out, "Because the type on the page is not pixels but, essentially, ink -- tiny chips of pigment on a layer of circuitry -- E Ink promises the best of both worlds: the visual appeal of ink on paper and the renewability of a computer screen"
Some of us have wondered how e-ink technology works.

In addition to information on the linked page above, here's a video of the e-Ink process by the Museum of Science, Boston. The movie requires Real Player. How Stuff Works also has an article on how electronic ink works, and Jason Slater Technologies has a brief and less-technical article on it.
Even in a new Kindle world, there are competing technologies already challenging e-ink right now, and I'll probably include some of that too.
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