Don't listen to the hype. Ignore the commercials. Leer skeptically at the salesman. There is no such thing as an LED TV, and "LED" doesn't mean it's any better than other TVs.
LED is just a type of LCD, with strengths and weaknesses that make it better in some ways, worse in others, and rarely worth its price premium over other technologies.
All LCDs have two basic parts: the LCD "glass" and the backlight. The backlight creates all the light, while the LCD blocks some of that light to create an image. An apt analogy is a piece of film in a projector, if you remember those. The projector has a lamp creating lots of light, and the film blocks some of that light to create the image.
In edge-lit LED LCDs, the LEDs are along the edges of the screen, firing toward the center of the TV. These models tend to be extremely thin, the thinnest of all flat panels.
With backlit LED LCDs (sometimes called full-array), the LEDs are arrayed across the back of the TV, facing you. There are more LEDs with this type, so they are generally more expensive than their edge-lit counterparts. There are benefits, though, which we'll get to in a moment.
Check out LED LCD backlights explained for more info on LED LCD backlighting.
Contrast ratio ("local dimming")
Because the part of the TV that creates the image is the same (the LCD), there are many more similarities than differences between LED LCDs and regular LCDs.
One exception is "local dimming." With some LED models, areas of the screen can dim independently. Both edge-lit and backlit LED LCDs can have this feature, but backlit versions have a much more pronounced effect. Keep in mind, though, that the vast majority of LED LCDs are edge-lit. Only flagship and high-end models are backlit (like the Sony HX929, one size of the LG LW9800, and the Sharp Elites).
There's a limit to what local dimming can do, though. Unlike plasma HDTVs, local-dimming LED LCDs can't dim individual pixels. They're limited to "zones." How many zones varies, but assume it's 12 to 16 for edge-lit models, and a few hundred for full-array. It's definitely not the millions that would be needed to cover all the pixels of the TV (for one, there are probably only a few hundred LEDs back there).
Edge-lit TVs have fewer zones because their LEDs are along the edges of the screen. One or two LEDs are responsible for significantly large areas of brightness across the screen. While local dimming on edge-lit LED LCDs may result in a contrast ratio improvement over CCFL LCDs, they will not be as good as backlit local-dimming LED LCDs or plasmas.
On a backlit TV with local dimming, the LEDs behind smaller zones can dim independently. So smaller, specific dark parts of the image can be darker, while the LEDs behind the bright parts stay at 100 percent. This creates a better contrast ratio than what's possible with the LCD alone. So local-dimming LED LCDs typically have a better contrast ratio than CCFL LCDs.
Here's an example. In the left image below, you see a representation of a plasma's image. On the right, an LCD without local dimming.
I can't make your computer's screen brighter or darker, but on a good plasma (or CRT or LCOS-based projector), the lights in left image would be bright, the sky dark. On an LCD (right), the same image would be flatter. The lights wouldn't "pop." The contrast ratio is the difference between the brightest part of the image and the darkest part. The higher the contrast ratio, the more depth and realism a TV image has.
On a local-dimming LED LCD, parts of the image can be dimmed. Once again, the left image below is a plasma (or CRT or LCOS display):
The top of the image on the right, being far away from the lights of the castle, can have the backlight behind it dimmed, creating a darker area. The dark areas in the middle of the image (trees, actually) are too close to bright lights. The limited "resolution" of the LED backlight can't dim such a small area. Therefore, it has to be brighter than it would be if the TV could dim those pixels directly, and the image has less "depth." In reality, the effect is rarely this obvious, but the contrast ratio of local-dimming LED LCDs is never as good as the manufacturers suggest. An edge-lit LED LCD with local dimming, using the exaggerated example in the image above, might only be able to dim the upper corners.
The contrast ratio for local-dimming LED LCDs is better than for CCFL LCDs, but it's not as good as the best plasmas'. It can't be, as the contrast between adjacent pixels on an LCD is limited by the backlight behind them and the LCD glass. Plasmas don't have this limitation, as each of their pixels generates its own light.
I go into this in more detail in my article on contrast ratios (or how every TV manufacturer lies to you).
Claims of better color accuracy with LEDs is largely marketing hype. TV images are built using the three additive primary colors: red, green, and blue. The entire TV system is based on this, and every color you see is created using just these three colors. The color is determined by color filters built into the LCD glass itself, as nearly every LED LCD uses "white" LEDs. The color accuracy (or inaccuracy) of an LCD is decided by the manufacturer using different color filters and electronics tuning. In other words, color is a design choice that has nothing to do with the light source. It's possible to have inaccurate colors on an LED TV, and accurate colors on an CCFL LCD.
Sharp's Quattron technology adds a separate yellow subpixel, but this color is created by the TV, just like in every other TV.
Light output (brightness)
Where LED-based TVs do have a clear advantage is in light output. They can be extremely bright. For most people, though, this brightness is excessive, and they'll turn down the backlight setting so as not to be blinded by the TV at night. If you watch a lot of TV during the day, and can't control the light in your room, then maybe an LED LCD is worth checking out.
Just know that CCFL-based LCDs and plasmas aren't dim, they're just less bright. This is especially important if you're looking at the TVs in a store, where the added brightness of the LEDs is going to bias your eye toward them. At home, the higher contrast ratio of plasmas will likely look a lot better.
Most LCDs, and especially LED LCDs, suffer from poor brightness uniformity. This means parts of the screen are brighter than others. With some models, this could be the areas along the edges of the screen. With others, it could appear as splotches of brightness on the screen.
Here's an artist's rendition of what this looks like (just kidding, it was me).
I go into this issue in detail in my article on whether LCD and LED LCD HDTV uniformity is a problem. That article also has some pictures of CCFL backlights and a diagram of LED edge-lighting.
Another advantage of LED-based LCDs is in the area of energy efficiency. LEDs can create more light using less energy. If your goal is to be as green as you can, LED LCDs, especially with their backlights turned down, are the way to go.
However, if your goal is to save money, this isn't it. The amount of money you'll save in a year between LED LCDs and plasmas is so minimal that you'll never recoup the difference in price between the average LED LCD and the average plasma. I did an article on this over at HD Guru.
There are benefits to LED LCD TVs, but don't assume that just because a TV uses LEDs that its picture looks better, or that it's worth a price premium.
"LED TV" is 100 percent a marketing term. Like all good marketing terms, it's a slight fib wrapped around a kernel of truth. Manufacturers are implying it's a new technology, but aren't outright saying so.
There are plenty of excellent LED LCDs, just don't assume that because they're expensive they're the best choice for you (or that they have the best-looking picture available).
So now you know, and knowing is half the battle.