Papershow made a big splash last year at Macworld during its introduction, and since then has apparently sold fairly well in business circles (the product is now being sold in Staples as well). This year, Papershow is introducing a new edition styled for education applications, called Papershow for Teachers, that features not only a few upgrades to the functionality, but a few targeted extras meant specifically for the classroom.
Just like the previous edition, Papershow for Teachers has a special pen (with a camera built into it) and a Bluetooth-enabled USB drive that hooks right into your Mac with all the necessary software pre-installed on it. The pen's camera can only be used with special paper (a pad is included with the package, and you can, of course, buy more) that has a series of dots on it to tell the app where and when you're drawing on the screen. So very easily, anything written on the special paper gets translated up to the screen.
That's the basic functionality, but a printed toolbar on the paper adds a lot more. By "pressing buttons" on the printed toolbar, the pen can change colors, change shapes, or even do things like pull up graphics or draw shapes on screen. The new teacher edition includes an extended toolbar with even more functions -- teachers can now pull up a virtual calculator on screen, and even do things like draw an angle and then ask the software to calculate exactly what it is. Any images created with the app can be exported out to email or PDF, so teachers can share notes with their students right away.