Microsoft's updated Windows Vista website shows some new peaks at Windows Sidebar and Desktop Gadgets.
Click on the above image for a larger view.
Today at CES, Windows Sidebar and Desktop Gadgets were also featured in Bill Gate's Keynote. As you can see from the above screenshot, the Windows Sidebar's UI has somewhat been updated. Demoed at CES was a few of the same Gadgets we've seen before such as the RSS Feed Gadget, Clock Gadget, and Photo Gadget.
Essentially, Desktop Gadgets are mini-applications that can be pinned to your desktop. Windows Sidebar serves as a place to "pin" you Gadgets. You can choose to use Windows Sidebar or just have your Gadgets free floating around your desktop. Expect to see a wide variety of Desktop Gadgets such as one for Windows Mail and Windows Media Player.