The report cites two main factors that are driving VC investments, smartphone penetration and the Internet of Things. The first one is no big surprise but some people may not be familiar with the concept around the Internet of things and M2M communications.
Readwriteweb has a good archive of posts on the IoT, and here is a good definition of M2M communications – its basically the infrastructure that allows machines to talk to machine. If machines talking to machines sounds familiar it may be because you have already heard about the so called Web 3.0, which is kind of a short hand reference to a semantic ontology for metadata that allows machines (computers) to be more effective and or efficient in communicating contextual information with each other.
So from a very low level, like transmitting sensor data (long range, low power!) to the most high level philosophical ordering of information about information, the Internet of Things will touch many aspects of your everyday life. There will be sensors in your refrigerator, lots of them in your car, sensors that monitor the electricity that powers your home, and probably even sensors in you.
Update: Don’t forget your kid’s toys!
In terms of funding by business category, its no surprise that the most money is behind mobile commerce applications and services.