The Kindle 1 may have been replaced by the Kindle 2 in February 2009, but it is not forgotten, and helped advance the state of the ebook reader industry dramatically. Amazon released the Kindle 1 in the US in November 2007, and it was an instant hit which was on backorder for months, especially after Oprah endorsed it. For most people, if you say "eReader," they think Kindle.
The Kindle's e-paper itself must simply be seen to be believed. It is sharp in a way that computer screen are not, and the screen has no glare or backlight. You can read it in direct sunlight, even on a beach, in a way you simply cannot with a laptop or mobile phone display. It also does not get warm, so there are no unpleasant issues from a late night reading session. Even with only 4 greyscales compared to the 16 of current leading eReader, the Kindle 1 could display basic illustrations and line drawings well enough.
There were certainly design issues with the Kindle 1--stylistically it simply looked like it had jumped out the 1980s with its harsh angles. Likewise, many users complained about accidentally hitting the page turn buttons on the margins--these and other issues were corrected in the Kindle 2, but despite the issues, users generally loved the device more for the functionality than for the form.
The memory storage was only 128MB onboard, but it came with a 2 GB card to augment it.. Battery life was several days with wireless on, or up to two weeks with it off--a prime advantage of the low power electrophoretic display.
Unlike many e-readers, the Kindle had a fully functional keyboard on the bottom. This was probably its most most divisive feature, with some wanting it to be all ebook display and less cluttered with buttons, and others appreciating the flexibility. At least the Kindle was easy to type with, and as with the current version you could add notations and save them, just like writing in the margins of a book or writing a sticky note.
If you liked listening to music as you read, you could play mp3 or AAC files in the background, either via built-in stereo speakers, or through earphones. You could adjust the text size--particularly valuable for older readers or if your eyes were tired.
Amazon had an ambitious aim with the Kindle, aiming to change the way we read printed material. Did it transform mainstream book reading habits in its year and a half in release--probably not, but by its February 2009 replacement by the Kindle 2, it had already won over the early adopters (mobile professionals, bibliophiles, and technophiles) in droves. It's now up to the Kindle 2 to take e-ink eReaders mainstream, a process currently underway.
Connecting: Any eBook reader must be judged on the basis of its access to actual ebooks, not just its capabilities. On this front, no other reader even came close to the Kindle 1. 
Best of all, Kindle was at the time the only reader that had a built in mobile 3G EVDO modem which--essentially a global high speed cellular internet signal with no charge for use. This of course was not present everywhere, and in some rural locations it falls back on a slower 1xRTT signal, and in some remote locations has no signal at all.
Again, there were no wireless charges or monthly fees for the Kindle 1, yet you also had access to Wikipedia and a dictionary built in. As mentioned the basic web browser also allowed you to view basic web pages, and for many of those who had access to text based email readers, you could even check your email on the go.
Like Apple's successful iTunes (and let's face it, Amazon was trying to make an "iTunes for books"), any titles you purchased from Amazon could be re-downloaded to your Kindle at any time (or your Kindle 2, or no doubt Kindle 3 when that comes out one day), on the off chance you lost your memory or managed to fill it up and need to delete items to make space.
Accessories: The Kindle 1 had all manner of accessories, from screen protectors, skins, cases, chargers, etc.
Price: The Kindle 1 originally sold for $359 at its 2009 launch, but this was cut to $299 in the following year.
The Kindle 2, which is much more capable, also debited at $359, but has since come down a full $100 to $259.
The Kindle 1 has been superceded by the Kindle 2, but more than any other reader it helped "kindle" today's eReader industry.
eBook Reader Basics