As more and more type of devices get connected to the Web, I'm seeing a new set of entrepreneurs emerge who are comfortable taking formerly disconnected devices and service-enabling those devices with audience-appropriate content and applications - this is not always easy, as the interplay of hardware, software and cloud-based services creates a complex web of engineering, marketing, support, and business model issues. In addition, the ever-growing popularity of mobile phones as the low-end commodity magnet to any specialized CE device is a big threat.
Examples of service-enabled devices include GPS devices (e.g. Navigon), MP3 players (e.g. Zune), media players (e.g. Archos), radio (e.g. XM, Slacker) and portable gaming devices (e.g. Sony PSP). I believe appropriate experiences will also be created on completely new ambient Web devices such as the Chumby, wifi digital photo frames, car keys, watches etc. Stacey Higginbotham has a good preview of a few wi-fi connected devices on GigaOm.
Some of the software elements that are getting popular across these Web-enabled devices include: Embedded Linux, Webkit browsers and web services APIs such as Twitter, Google Maps, Flickr, etc.. And software entrepreneurs are creating sets of services that work across multiple web-enabled device types - an example is Ambient Devices and I believe Chumby will also make a play here with the Chumby Widget Network.