(FORTUNE Magazine) – Computer companies have had an epiphany. They now tell us that computers are hard to use. "We still need to do more to make computers easier and more intuitive," Bill Gates, the world's chief propeller head, said recently. Well, duh!

Mr. Gates and his fellow computer nerds have discovered that there are millions of consumers who want e-mail and Net access at home but without the cost and complexity of a conventional computer. To reach these computer-phobic masses, more than a dozen companies have introduced a new class of small, relatively low-cost communications devices known as Internet appliances--basically, a screen, a keyboard, a modest electronic brain that holds a simple operating system and some browsing software, and Internet connectivity. As a tradeoff for simplicity, they give up versatility. Typically the machines can't run software that is not on the Internet, and they lack a hard disk to store data. Some link the user directly to a specific online service like America Online or Microsoft's MSN network.

A few of these new devices are designed for people who break into a cold sweat at the idea of using a computer. Some are designed for people who already have a computer in the home but want a friendlier second device for use in high-traffic places where a conventional PC would be as welcome as a skunk.

The computer companies want people to see these appliances as warm and fuzzy, like a puppy. As a result we are now being offered a kennel full of digital mutts, part computer, part toaster. Some of these new Internet appliances are charming, friendly, and housebroken; some are mangy mongrels that drool and have fleas; some really bite.

I've been playing with a litter of these Internet appliances in recent months. My judging criteria: The devices have to be easy to use and reliable, which automatically disqualifies ones that run on the Windows operating system installed on some 90% of all new PCs. They ought to be less expensive than a standard PC. They have to be smart enough to perform standard Internet-related functions like e-mail, Web browsing, and online shopping. They have to be house-trained--so technically reliable that they don't leave any hardware or software messes for someone to clean up. Finally they have to be attractive enough to be welcome in areas of the house where an ugly, ungainly PC is not, like the kitchen or bedroom.

The first real Internet appliance to come to market, the Netpliance i-Opener, was put to sleep recently--less than a year after its promising debut. With its small flat-panel display and keyboard, it became the model for many of the newer Internet appliances now coming to market. But fewer than 50,000 were sold, even when the price was discounted to $99 from an early $399. Unfortunately, the i-Opener cost Netpliance more than $500 to make (the company hoped to make up the difference by getting $22 a month from each customer to be connected with its proprietary online network). The i-Opener is likely to be reincarnated next year as a dedicated connection device for the AT&T WorldNet Internet service.

The Netpliance device was not the first Internet appliance to bite the dust, however. Earlier this year Dell tried to persuade consumers to buy its WebPC, a simplified PC that was overpriced and, well, too much like a PC. The WebPC was sent back to the pound a few months ago.

On the same day that the i-Opener folded, the pick of the litter emerged. Gateway introduced its awkwardly named Gateway Connected Touch Pad With Instant AOL--we'll call it "it" for short--a stylish and comparatively useful device that is designed for people who already have a PC in the house and already subscribe to America Online. Geeks will want to know that it uses a Transmeta Crusoe processor, a Netscape Gecko browser, and a version of the Linux operating system.

This $599 appliance brings to the kitchen popular AOL features like e-mail, news, chat, instant messaging, online shopping, and full Internet access. It is stylish--or at least not ugly--and the touch-screen controls are ideal for poking up the weather or a family calendar without typing a string of commands. And here's a bonus: On a home network, the Instant AOL software fires up quickly and allows more than one family member to use the main AOL account at the same time.

It can sit on a countertop or be mounted underneath a kitchen cupboard for those who don't want to give up counter space. It has built-in support for either dial-up or high-speed Internet connection, and includes built-in support for networking with the home's PCs and other appliances over standard phone lines. Its screen frame holds a pair of semi-decent stereo speakers. Gateway is developing some interesting applications that sometime next year will make it a very entertaining kitchen addition. I like it a lot, but again, it is not for first-time computer users.

Enough about "it." 3Com, the company behind the Palm handheld computer, has a similar appliance with a much more manageable name: Audrey. Unlike Gateway's AOL model, Audrey ($499) lets its owner use any Internet service provider. There are many things to like about Audrey, including its touch screen, its clever support for synchronizing with all the Palm organizers in the family, its manual knob for dialing through a selection of favorite Websites, and the way the clear-plastic touch-screen stylus glows green whenever the user receives new e-mail. Its stylus can be used to scribble handwritten notes for family members, and there is a built-in voice recorder for verbal messages.

But there is also a lot to dislike about Audrey. Film buffs will recall that Audrey was the name of the man-eating plant in the movie The Little Shop of Horrors, and little horrors abound in this machine, including a small, dim display screen and a dinky, toylike keyboard. And then there is the annoying little giggle it makes at startup just to remind the user how friendly it is.

The first Audrey we tested died happy. It giggled, froze, and worked no more. The lights were on but nobody, electronically speaking, was home. The touch screen was unresponsive. More disturbing, when we called 3Com's technical support line we got a recorded message saying that technical support was unavailable because of technical difficulties. That is not a good sign.

Audrey is just the first of a series of Internet appliances under the 3Com Ergo brand. I'd wait for version 2.0.

The most intriguing challenger is NadaPC's Icebox (for interactive communications entertainment box). This all-in-one device is notable not just for what it does--it's a Samsung-made nine-inch TV, DVD/CD player, and Internet appliance all at the same time--but also for what it costs: nothing. NadaPC said recently it would give the Icebox away without charge to anyone who signed up for 36 months of its Internet service at $21.95 a month ($790.20 over three years). What's the catch? As recently as mid-November, NadaPC said the Icebox was not yet ready for review, which means it probably has some fleas. But we're eagerly waiting for this Icebox to cometh.

Both Compaq and eMachines have created Internet appliances linked to Microsoft's MSN network. Compaq's first crack here was the iPAQ Home Internet Appliance IA-1, consisting of a flat-panel face on a bulbous rear end, with a clumsy little keyboard. The IA-1 costs $599, or $199 with a 36-month MSN subscription at $22 a month. Compaq recently introduced Home Internet Appliance IA-2, which goes back to a conventional picture-tube monitor and costs $499. But that makes it bulky. I'll wait for version IA-3.

The eMachines MSN Companion is a bit cheaper at $349 (the same $400 rebate applies with an MSN contract), but it requires the purchase of an external monitor. Let's hope flat-panel displays get cheaper soon.

One of the larger bow-wows of the bunch is the New Internet Computer (NIC), from an Oracle-backed company of the same name. The idea is great: a $199 computer that comes with free Internet access. You'll need a monitor, which costs $130 extra. NIC's feeble processor runs the Linux operating system, and the built-in software needs a lot of work before it can be considered friendly. The free NetZero Internet service is not quite worth every penny. Basically, NIC is a very cheap PC that works like a very cheap PC.

So in the end the Gateway Connected Touch Pad With Instant AOL takes the best-of-show ribbon. But at $599, plus $22 a month for AOL service (AOL is soon to be the parent company of FORTUNE), consumers will be paying a lot for a kitchen information center. As Gateway has made amply clear, this is not intended to be the only computer in the house.

And that brings us back to yet another alternative, the Apple iMac. It does everything the appliances can do (with the exception of the touch screen) but has all the power and flexibility of a "real" personal computer. The design is fun and colorful. The machine occupies less space than some of the appliance models. It takes about ten minutes to set up and get connected to the Internet. It works with any Internet service provider. The Mac OS software is easier to use than Windows. And the entry-level iMac costs $799, which over the life of the computer is not much more than Gateway's device. Sure, the owner has to spend hundreds of dollars more for software and peripherals to take full advantage of the iMac, but that lets you play games, run educational software, download files, and mess around with digital photographs. In other words, unlike the other mutts in this litter, this old dog can teach the user new tricks.

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