I've seen a lot of discussion regarding POD books lately and it seems to me a lot of people are confused about the term, and, as a result, tend to view it in a negative light. That's not entirely fair, as POD is not necessarily a bad thing. Just as vanity publishing isn't necessarily a bad thing.
Vanity publishing (upfront vanity publishing, that is) is fine for certain areas. A small niche market, for instance - say you're a Matchbox car collector and you wrote a book on Matchbox car collecting (for argument's sake, let's say a nonfiction book about Matchbox car collecting - as it is generally not a good idea to self-publish fiction. Books such as Eragon are the exception, rather than the rule.)
So, you write a how-to book for Matchbox car collecting. Chances are, there isn't a huge market for that sort of book. But there might be a small market - hobby shops, maybe, things like that. In this case, there is a void that vanity publishing can fill.
A lot of vanity publishers use POD technology. Some believe POD stands for Publish on Demand - which is sort of a vanity press thing. The publishing on demand, that is. You pay, they publish. That's it.
However, in truth, POD stands for Print on Demand, which is an entirely different animal. POD is a process - digital printing - where books are printed as they are ordered. There is less overhead, less of a chance of a warehouse full of unsold books. The order is placed, the number of books ordered is printed, the order is shipped.
A lot of epublishers employ this technology because of the cost-effectiveness. Of course, a lot of publishers won't accept returns on these books, but there are some who, just as an off-set print publisher will do, accept returned books.
POD has gotten a bad rap of late - and I think it is unjustifiable. POD doesn't necessarily mean cheaper quality, or badly written book. It is simply the terminology in how the book is printed. Yes, some publishers (**cough, cough** PublishAmerica, for one) have given POD a bad name simply because they tend to push out poor product to begin with. In PublishAmerica's case, POD could easily stand for Publish on Demand because it has been fairly well proven that PA will publish anything. Not to say all of their books are terrible, there are probably an average number of well-written books that could have found homes at true publishers, but the majority is about on par with the average slush pile.
So don't automatically assume POD equals a lousy book. Even some vanity published books are worthwhile reads. Just check out some of the books on POD-dy Mouth's blog - there were a few gems hidden amongst the slag. And don't assume that because an epublisher employs Print on Demand technology they are not a legitimate publisher.