The Eye-Fi Wireless SD card for digital cameras reduces a Wi-Fi card to fit on an SD flash storage card, with room left over for 2 Gbytes of storage. But amazing as that is, the most interesting thing about Eye-Fi is the way it works the network.I first saw the Eye-Fi Wireless SD card at a trade show, and was so intrigued that I put the gizmo into InformationWeek.com's upcoming Holiday Gift Guide (look for it this weekend), and sought out Eye-Fi CEO Jef Holove to ask him how it works.

The Eye-Fi is intended to solve one of the major annoyances of digital cameras -- automatically transferring images from your camera to wherever you want to store your photos, whether that's on a local PC or Mac, or Web sites for photos, blogs or social-networking. Eye-Fi currently works with 17 sites, including Facebook, Flickr, and TypePad.

The hardware form factor is plain vanilla SD -- it will fit in any camera that will accept an SD card (which is currently about 77% of the camera market, said Holove). But shrinking the radio and interface down to SD size weren't big problems. According to Holove, the two technical hurdles were tuning the antenna built into the card, and optimizing its power management.

The orientation of the card in the camera and the amount of metal that surround it both affect antenna performance in ways that had to be taken into account in the card's design. And while the card draws relatively little power, it has to function within the camera's overall power profile.

The card is actually powered down most of the time, said Holove. It knows if it's got new content and won't even try to transfer files if there's nothing to transfer. If it detects new data, it wakes up every minute or so and checks for networks it knows how to connect to. Eye-Fi works only from a digital camera to a host computer -- it won't work on public Wi-Fi networks that require you to log in. So you're not going to send pictures to Shutterfly from the bottom of the Grand Canyon -- unless you live at the bottom of the Grand Canyon. It's strictly for cameras, too -- it works in one direction and sends only JPG files to the host (if you want to transfer RAW files, you'll have to do that some other way) -- so it's not going to magically make your PDA or media player with an SD slot into a wireless device.

The Eye-Fi card packs an impressive amount of technology into a device the size of your thumbnail, but the other half of the product, the service half, is just as interesting. Like many new hardware and software products, the Eye-Fi card is a one-time investment that buys you the promise of unlimited use of a Web-based service. When you choose to have the Eye-Fi card send photos to your online site, the image files get there the way they always have. But instead of you transferring the files from camera to computer, logging into the service and uploading the files, an Eye-Fi service handles all that -- and also does things like resizing the files if your destination site has limits.

This is a business model that used to have some risk attached: nothing is free, and what if the customers use more of the service than the provider can afford? Holove wasn't worried. The Eye-Fi service is just servers and bandwidth, and both those things are getting cheaper over time. The company doesn't store the photos, it just proxies them from your PC to their final destination. That doesn't mean Eye-Fi isn't looking for ways to make a buck on its service, too. "We can introduce premium things people will want to pay for," said Holove. But the cost of servicing the device is so low, in comparison with the initial price, that the business model is a good one.