Kindle, netbooks are going to be a popular gift for Xmas. Also like the Kindle, you should understand their limitations - there's a good chance the recipient won't like the limitations.
The primary limitation of a netbook is speed, no CD-ROM, and keyboard/screen size. In exchange, you get increased portability and longer battery life. You can't play games well on it, but you can carry it with you wherever you go and sit for hours in a café typing away.
I love netbooks. I've never owned a normal laptop computer. I've always purchased the smallest laptop that I could comfortably type on. Back then, they were known as "subnotebooks" and cost more than normal. I've written a million lines of code on netbook class machines, written hundreds of blog posts, and many chapters for books.
Oddly, people don't understand the tradeoffs. I hear things like "oooo, that's a cool looking computer, I want one just like it, but with a CD-ROM drive". Well, that's the point, a netbook is about tradeoffs. You can't get a CD-ROM in a computer this small.
The first tradeoff users will notice is the keyboard size. Most netbooks are in the 10-inch form factor, which have keyboards that are roughly 90% of full-sized. I've used that keyboard size for years and can comfortably type on it, but it may be a problem for some people. (The 11.6-inch netbooks have full-sized keyboards).
The second tradeoff they will notice is speed. Netbooks can usually play videos well, but hi-def videos or those with fast action may cause stuttering. You'll notice it occasionally. Likewise, a lot of 3D games won't run on these machines.
UPDATE: Another tradeoff is screen resolutions. A lot of them have 1024x600, which many people think is too small. Some websites don't render well on such a small screen. The larger netbooks are 1368x768, which is closer to normal for laptops.
In exchange, you get ultra-portability. At 3-pounds and 10-inches, they are so small you won't notice them in your bags. With heavier laptops, you find excuses NOT to take them with you. With netbooks, you are likely to take them wherever you go.
Netbooks also last longer on battery. You can take them with you AND not worry about how long they will last on battery. Most netbooks will last 5-hours minimum, whereas normal notebooks usually stop after 3-hours. Some netbooks advertise 11-hours of battery life.
Netbook have traditionally also had low prices. However, recently full notebook computers have dropped in price as well. For around $450, you can get either a high-end netbook or a low-end laptop that can play games better (but be larger and not last long on battery). The key to buying a netbook is to know your audience.
Sadly, I can't seem to find the $200 netbooks anymore. I purchased a bunch of those as disposable computers for pentesting. Now, the cheapest netbooks you can get are $300, with high-end ones going for $450. There are lots of good online retailers (Amazon. TigerDirect, ZipZoomFly), but I'm most familiar with NewEgg, which has a good selection of netbooks. The units are all similar, but I thought I'd highlight some standouts. I don't think you can make a "wrong" choice.
First of all are the Asus machines that focus on battery life, with various units promising 8.5, 10.5, and 11-hours. While it's unlikely that you'll get the advertised battery life in real-world conditions, they do last a LOOOONG time on battery. At $330, the 8.5-hour ASUS Eee PC 1005HA is a good buy (90% full size keyboard, 1024x600). It's what I got my mother last year. (Sadly, she doesn't get the disposable aspect of the netbook - she takes good care of it, whereas I think netbooks should be tossed around and abused because they are so cheap).
At $420, you might consider the Acer Aspire AS1410. It has a normal Core2 processor (1.2-GHz dual-core) running at very low power and runs Windows 7 Home Premium. This processor will be noticeably faster than the Atom processor found in other netbooks, and has a full-sized keyboard and 1368x768 (thus, getting rid of the biggest tradeoffs). If you are worried about the recipient complaining the unit is too slow, then this would be the unit to get. Yet, it's still ultraportable and will last 5-hours on batteries. It comes in a single core (1.3-GHz) and dual-core (2 x 1.2-GHz) version, I'd go dual-core.
I'm writing this on a $2500 Mac Book Air running Windows. It's the same weight (3-pounds) as the other netbooks, but has a 15-inch screen and a huge keyboard and a super-sexy slim form-factor. It also has a 128-gigabyte solid-state drive (SSD). It's the ultimate "netbook", but for a frivolous amount of money. My favorite pentest netbook is the Acer Aspire One AO751h, the older version of the AS1410 above but with an Atom processor.
All of the netbooks have similar limitations of keyboard size and slow speed. If the recipient of the gift doesn't mind sacrificing this in order to get ultra-portability, then pretty much any netbook will satisfy them. The two things that would drive my purchasing decision would be to get one that has an ultra-long battery life, or get something like the AS1410 that has improved speed and larger keyboard.