­It's the holiday season and your peaceful suburban domicile is overflowing with houseguests. You need a nice, hot shower to soothe your nerves, but you're in line behind your in-laws and cousins. In times like these, you'll be glad you installed that new tankless water heater in your garage.

The idea behind a tankless system is that it heats the water as you need it instead of continually heating water stored in a tank. Tankless heaters have been the norm in much of Europe and Japan for quite some time, but they haven't gained popularity until recently in the United States -- largely due to the green movement. If you're a good candidate for a tankless system, you can save a substantial amount of money every year on your monthly bills while at the ­same time conserving natural gas. Tankless heaters also last about five to 10 years longer than a tank heater, take up much less space and provide you with an unlimited amount of hot water. On the downside, a tankless system can cost up to three times as much as a tank heater and often requires costly upgrades to your natural gas line and an expensive venting system.

So is it cost-effective to switch from your traditional tank heating system? Or should you just wait until your current water heater bites the dust to make the switch? This depends on many different factors. ­In this article, we'll break down these factors to help you weigh your decision on whether or not to go tankless. We'll also explain in simple terms how it works so you know what you're getting into.