The Android OS isn't just powering high end smartphones, it also runs barebones tablets sold at Kmart for the price of an iPod nano.

Update (August 7th): It appears that Google hasn't licensed Android to Augun and as such the Android Market will not work on this product.

A Kmart circular came out last week with an uber-geeky product that perked up a few ears in the gadget community.  Augen's 7-inch Gen-78 Android tablet which runs Android 2.1 --take that Sony (SNE) and Dell (DELL)! -- is on sale for $150 (normally $170).  The tablet is as bare bones as it gets, but it does work and has some features which may interest those who can't reconcile the $500+ price of Apple's (AAPL) iPad.

• Android 2.1 (no skinning) 800x480 Display
• WiFi 802.11G
• 2GB of storage +SD card slot (up to 32GB)
• 256MB of RAM (same as iPad)
• HDMI out for 720P viewing on an external display
• Android Market access
• eBook reader
• YouTube app, Maps (is that Skype I see on the bottom left?)

To make things even more interesting to hackers, Cyanogen already has Android 2.2 Froyo working on the tablet. Yes, including Adobe's Flash. The hacker interest should only make devices like this more appealing.

That's a pretty interesting set of features for less than a third the starting price of an iPad.  In this depressed economy, it isn't hard to imagine more than a few people interested in this product.  Kmart perhaps got ahead of itself in advertising the unit as well.  The unprecedented demand combined with lower than expected supply means you can't hardly find one in any Kmart across the country. Kmart, however, is keeping potential customers updated on its blog: More