(FORTUNE Magazine) – Since its debut two years ago, when it was called the PalmPilot, more than two million Palm hand-held computers have flown off store shelves. The device's appeal is its size and speed--and the fact that it simply seems to work better than any other personal digital assistant (PDA) on the market. We asked the Pilot's inventor, Jeff Hawkins, and his team to point out some key design elements of the $399 Palm III. Hawkins recently left 3Com, Palm's owner, to form a new PDA company. He's not alone: Manufacturers like Casio and Philips have introduced Microsoft-driven imitations of this best-selling gadget. These products mimic some of the Palm III's features; whether they can mimic its popularity remains to be seen.

--Ed Brown

SIZE: Hawkins wanted to create a device that could fit in virtually any shirt pocket. "A guy in our business-development group became our guinea pig because he wears Brooks Brothers shirts, and they have the smallest pockets," recalls Rob Haitani, a member of Hawkins' design team.

ICONS: Palm silk-screened these icons of commonly used functions onto the unit--which saves money for both the manufacturer (it keeps the expensive LCD screen smaller) and the consumer (batteries last longer).

WRITING AREA: Palm's design team had heated arguments about this dedicated writing area--some people thought it should disappear when it wasn't in use. Palm decided users would want something permanent and instant; anything else, Hawkins says, would be "annoying."

DIMPLE: The idea for the tiny dimple on this button came from Casey Cowell, CEO of former Palm owner U.S. Robotics--he wanted to be able to turn the unit on and off with the tip of his pen.

STYLUS: If you unscrew this stylus' top, you'll find a pin that will reset the unit without losing any data. Not mentioned in the instructions, it's there for programmers of third-party software.

INFRARED PORT: This feature--which, among other things, allows you to beam your "business card" to another Palm III user--was almost included in the first version of the product. "We decided that [there was] no point in doing this until we had a lot of users," says Hawkins.

NAME: Palm Computing was sued in France, of all places (French trademark laws are known to be strict) by the Pilot Pen Corp. for borrowing its name. When the suit was settled, Palm could have dropped "Pilot" from its name in France only but decided that that was more trouble than it was worth. Hence, Palm III.

BUTTONS: These buttons are arranged according to a typical user's preferences, with the most popular applications--date and address books--on the left, and the to-do list and memo pad on the right. Why only four buttons? It's the old 80/20 rule: 80% of the time you're only going to use 20% of a gadget's functions.