Barnes & Noble has touted its Nook Color as "the reader's tablet" since the product's inception. But after the company announced the launch of an Android OS update and extended features on the device this week, we're not sure what to call it anymore.

E-reader? Tablet? E-tablet?

Version 1.2 of the Nook Color's firmware launched Monday morning, bringing Android OS 2.2 (Froyo) to existing users of the e-reader tablet. The software includes expansions to web surfing on the device, including Adobe Flash and Air support, as well as the ability to receive e-mail.

The company also announced the launch of the Nook App store. Customers are now able to download and use apps on their Nook Color devices, while still being able to purchase books from the Barnes & Noble reading catalog.

The Nook Color app marketplace will launch with a relatively scant 125-plus apps – less than the amount launched with RIM's BlackBerry PlayBook tablet, which debuted with more than 3,000 apps, though more than Motorola's 50-ish Honeycomb tablet apps available for the Xoom upon its launch. Barnes & Noble says its app market will grow, as more than 5,000 developers have already registered for the Nook Color developer program, and hundreds of already-submitted apps are in line for vetting by B&N before being released for purchase.

One big drawback: Users of the Froyo-based Nook Color won't be able to download Android apps directly from the Android Market. They'll have to wait for developers to port versions of apps over to the Nook Color. That's a gigantic ecosystem – approximately 200,000 apps – that's completely out of reach for Nook users.

But B&N says it's easy to port Android apps to the Nook Color. "Our SDK [software development kit] is an extension of the standard Android SDK," said Claudia Romanini, director of developer relations for the Nook Color. "Developers don't have to do much other than remove features not supported by our hardware (GPS, camera, telephony), and then rescale the app in terms of font sizes and graphics, to make sure it works on our display."

The Nook Color's transition into an e-reader-tablet hybrid may be a smart move for Barnes & Noble. Gartner research forecasts sales of 11 million e-readers in 2011, but it's a much smaller market than tablets, where IDC predicts 44.6 million units to ship in 2011. (IDC defines media tablets as iPads or Android tablets that don't rely exclusively on E Ink displays.)

The Nook Color also edges itself into a smaller market, both figuratively and literally. It's a 7-inch device, on par with that of the Samsung Galaxy Tab (which also runs Android 2.2 Froyo) and RIM's PlayBook, and significantly smaller than the 10.1-inch Xoom (Android's flagship tablet product) and the 9.7-inch iPad 2. The smaller form factor could appeal to audiences that don't want the unwieldiness that comes with extra screen real estate.

Barnes and Noble's tablet falls short of other tablets in other respects. The Nook Color is running on an 800-MHz processor with 512 MB of RAM, inferior to the slew of dual-core, 1-GHz-plus processors featured in most 2011 tablet debuts. Also, the Nook Color is currently available in a Wi-Fi–only version, but not 3G or 4G. And it's not running the most recent versions of Android: 2.3 "Gingerbread" or the tablet-optimized 3.0 "Honeycomb."

The price, however, is hard to beat. At a paltry $250, the Nook Color's bottom line bests the priciest of the new tablet debuts, many of which start at upward of $500.

"The Nook Color with its new Froyo upgrade is not an iPad, not even close," Gartner analyst Allen Weiner wrote in a blog post. "But those who are looking for a great cross-media reading device with some nice new multimedia bells and whistles, it remains a go-to device."

To install the new firmware, you can download it from Barnes & Noble and then sideload it onto the device. Or you can wait for an over-the-air update that will be pushed to all Nook Color customers next week.