Amazon has started rolling out a software upgrade for its popular Kindle electronic readers, adding the ability for users to share e-book passages with friends and followers on Facebook and Twitter.

The new social networking feature in version 2.5 adds another Web link to the standard Kindle and the larger Kindle DX, as Amazon finds itself in an increasingly competitive market, particularly with the introduction of the iPad. Apple's slate computer is designed for reading digital books, as well as watching online video, listening to music and Web browsing.

Before the upgrade, Amazon limited the 3G wireless connection that comes with the Kindle to accessing the online reader's bookstore. However, how far Amazon can go in tying the Kindle to the Web remains to be seen, given that the device as it exists today does not have a fully functional Web browser like the iPad.

In February, Amazon bought Touchco, a maker of touchscreen technology that could be used in a Kindle overhaul. Touchco's technology could be used to replace the black-and-white E Ink display in the Kindle with a color screen that could support multimedia as well as e-books. If Amazon decides to go this route, it would be in a better position to compete against the iPad.

Amazon has started distributing Kindle Version 2.5 first to a limited number of Kindle users, with a broad roll out planned to begin in late May. The update will occur automatically through the Kindle's wireless connection.

Another new feature in the upgrade includes password protection to prevent unauthorized use of a Kindle. Such a feature would likely be important in helping Amazon push the Kindle DX into the educational market, an area the retailer is targeting.

In addition, the upgrade offers sharper fonts and two new larger font sizes. Amazon is also adding the ability to zoom into PDF files and to pan around the documents to view small print and tables and graphics.

Finally, the upgrade will make it possible for Kindle users to organize books into one or more collections.

Amazon launched the Kindle in 2007. It's success proved the viability of the e-book market and led to the entry of numerous competitors, such as Barnes & Noble's Nook. Some analysts estimate the Kindle accounts for about 60% of the e-reader market.