Basically, hybrid water heaters combine the technology of tank and tankless conventional hot water heaters.
Traditional tank heaters heat from the bottom, with the air rising through the tank and exiting from the top, allowing a fair amount of heat to be wasted. Tankless models also heat from the bottom, but the water flows through copper pipes. However, tankless models have been criticized because they don't store water and continually provide hot water to multiple places in your home.
The technology behind new hybrid water heaters varies by the model. Eternal Hybrid, one of the few currently out on the market, uses multiple passes of the heat and water to warm up more efficiently. The machine has 44 pipes that heat up, and the water flows around them for quick heating [source: Eternal Water Heater]. And, unlike a tankless system, the hybrid heater contains a reservoir to hold some water at all times, so you never run out of hot water.
This isn't the only technology that hybrid water heaters can use. General Electric is planning a hybrid electric water heater to hit the market at the end of 2009 -- it uses hybrid technology to absorb heat within the air and then transfer it to the water [source: GE]. Hybrid WaterHeater Incorporated is developing a heater for 2011 that will amalgamate several technologies, including fuel cells, batteries and super capacitors [source: Hybrid WaterHeater Inc].
To discover the benefits of a hybrid water heater over what you're using now, read on.