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For an eye-popping introduction to the future of lighting, walk into the lobby of Philips Color Kinetics' headquarters outside Boston. The reception area is bathed first in pink, then lavender, then pink again. Hallways on either side undulate with a tunnel of pulsing blue, then purple, lights. The surrounding walls display Philips' latest products as they have been installed in a rotating selection of buildings, including the CN Tower in Toronto and Harrah's casino in Atlantic City, N.J. All this lighting is done with light-emitting diodes, or LEDs.

The energy-hogging incandescent lightbulb as we know it got a death sentence when President Bush signed the Energy Independence Act in December 2007; most such bulbs will be phased out beginning in 2012. Europe is nixing incandescents beginning in 2009. The race is on to develop devices that do a better job of converting electricity to light. Compact fluorescent bulbs have become a popular alternative, but LEDs have the potential to be twice as efficient. They typically last 50,000 hours, compared with 10,000 for a compact fluorescent and 1,000 for an incandescent bulb.

The hurdle so far is price. LEDs, semiconductor diodes that light up when current runs through them, are 10 to 20 times as expensive as incandescents, too high for use at home. But the Department of Energy predicts that steady improvements in semiconductor manufacturing will bring the price of white LEDs below that of compact fluorescents in five years. Large consumers of electricity see a quicker payback. Wal-Mart Stores (nyse: WMT - news - people ) and Shaw's have begun putting LEDs in some freezer cases. Lansing, Mich. is testing LED street lights. "The consumer is the last to convert," says Charles Jerabek, chief executive of Osram Sylvania, Siemens (nyse: SI - news - people )' North American lighting division. LEDs account for only 12% of the unit's $2.5 billion in revenue, but it's the fastest-growing piece.

At Osram Sylvania labs in Danvers, Mass. researchers are experimenting with blankets woven with LEDs to treat babies with severe jaundice. They're also developing LEDs for use in endoscopic surgery to replace the xenon lights currently in use, which are bulky and don't last long. Another innovation: square tiles of light that could replace fluorescent office ceiling lighting.

Twenty miles away in the showroom at Philips Color Kinetics a "screen" made of 50 vertical tubes (each 2 inches wide and 4 feet tall and composed of 760 individual diodes) of programmable LEDs projects a parrot moving in a forest, then flames flickering in a fireplace. By feeding video input into a computer, Philips makes the LED tubes function as a low-resolution video screen. Since LED lights can be tuned to different wavelengths of color, Philips is also working with retailers of luxury goods and jewelry to choose the best color for showcasing each product. Diamonds look best under blue-tinged white light, while gold shows better in warmer tones.

ElectroniCast Consultants of Upper Lake, Calif. says the market for LEDs in lighting should grow to $1.4 billion in 2009. "As the price continues to drop and the performance continues to increase, we'll see more adoption," says Philips Color Kinetics' vice president of innovation Kevin Dowling. "We haven't scratched the surface of this technology."

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Hue: This is what we usually mean when we ask "what color is that?" The property of color that we are actually asking about is "hue". For example, when we talk about colors that are red, yellow, green, and blue, we are talking about hue. Different hues are caused by different wavelengths of light. Therefore, this aspect of color is usually easy to recognize. Click for a more in-depth explanation of HUE.

Hue Contrast - strikingly different hues

Hue Constant - different colors, same hue (blue)

Saturation: Related to chromaticity, saturation tells us how a color looks under certain lighting conditions. For instance, a room painted a solid color will appear different at night than in daylight. Over the course of the day, although the color is the same, the saturation changes. This property of color can also be called intensity. Be careful not to think about SATURATION in terms of light and dark but rather in terms of pale or weak and pure or strong.

Saturation Const. - same intensity, different hues

Saturation Contrast - various levels of fullness, same hue