The fourth generation Apple iPods operate more efficiently, have more features, and cost less than earlier models.

Apple CEO Steve Jobs talks about the new iPod, and the impact of digital music in a Newsweek interview. “I was on Madison, and…on every block there was someone with white headphones, and I thought ‘Oh my god, it’s starting to happen!'”

The iPod, the cigarette box-size digital music player has smacked right into the sweet spot where a consumer product becomes something much, much more: an icon, a pet, a status indicator and an indispensable part of one’s life, reports Senior Editor Steven Levy in the July 26 Newsweek cover story. To 3 million-plus owners, iPods not only give constant access to their entire collection of songs and CDs, but membership into an implicit society that’s transforming the way music will be consumed in the future.

The considerably tweaked fourth-generation iPod that will roll out this week, and it looks a bit different, operates more efficiently, has a few more features and costs less than earlier models.

Highlights include:

• Elimination of control buttons in favor of the iPod’s “click wheel,”
• More efficient menus
• 50 percent boost in battery life.

Fans of the devices use it for more than music. “It’s the limousine for the spoken word,” says Audible CEO Don Katz, whose struggling digital audiobooks company has been revitalized by having its products on Apple’s iTunes store. And computer users have discovered that its vast storage space makes it a useful vault for huge digital files — the makers of the “Lord of the Rings” movies used iPods to shuttle dailies from the set to the studio. Thousands of less accomplished shutterbugs store digital photos on them.

In 1997, when Steve Jobs returned to the then struggling company he cofounded, he says, there were no plans for a music initiative. “Our goal was to revitalize and get organized, and if there were opportunities we’d see them,” he says. Jobs & Co. initially failed to notice the impending revolution in digital music. Once that omission was understood, Apple compensated by developing a slick “jukebox” application known as iTunes. It was then that Apple’s brain trust noticed that digital music players weren’t selling. “The products stunk,” says Apple VP Greg Joswiak.

In February 2001, Apple set out to create a groundbreaking music player and have it on sale for Christmas season that year. The requirements: A very fast connection to one’s computer (via Apple’s high-speed Firewire standard) so songs could be quickly uploaded. A close synchronization with the iTunes software to make it easy to organize music. An interface that would be simple to use. And gorgeous. Assessing the final product, Jobs bestows, for him, the ultimate accolade: “It’s as Apple as anything Apple has ever done.”

The October 2001 launch was barely a month after 9/11, with the country on edge and the tech industry in the toilet. Skeptics scoffed at the $399 price and the fact that only Macintosh users, less than a twentieth of the marketplace, could use it. But savvy Mac-heads saw the value, and the Pod was a hit, if not yet a sensation. From that point sales began to spike. No one was surprised that Apple sold an impressive 730,000 iPods during the Christmas season last year, but the normally quiet quarter after that saw an increase to 807,000. And last week Apple announced that sales in the just-completed third quarter hit 860,000, up from 249,000 a year ago.

To the delight of Apple (and the chagrin of Sony), the no-brainer description of the iPod is “the Walkman of the 21st century.” And just as the Walkman changed the landscape of music and the soundscape of our lives, the iPod and the iTunes store are making their mark on the way we handle our music, and even the way we listen to it. An equally big deal is the way the iPod is changing our listening style. Michael Bull, a lecturer at University of Sussex, has interviewed thousand of iPod users, finding that the ability to take your whole music collection with you changes everything. “People define their own narrative through their music collection,” says Bull.