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Yahoo recently launched ConnectTV, an innovative service that aims at merging Internet and TV content and make both easily viewable all on the same screen. To accomplish the task, Yahoo partnered with some of the world’s leading TV screen manufacturers, in a project that took over three years in the making.

The mechanism on which ConnectTV works is quite simple: with a TV set wired directly to the Internet, users will be able to go to a Yahoo site and install the widget of their choice on the Linux operating system working inside the TV. The widget will then install on the device and enable users to add Internet content to the usual TV programming.

For instance, an user might click on a widget for eBay or Flickr from the dock at the bottom of the TV screen, and get quick access to an interface that allows for easy you shopping or viewing on photos while watching TV. But the most interesting widgets will be the ones that work in harmony with the shows: for instance, you might be able to interact via Internet with all the users watching the same show, for instance via Twitter or even via chat.

Sony Corp., LG Electronics, Toshiba, Samsung and Vizio are among the ones who partnered with the search engine and earlier today showed off their latest flat-panel television models embedded with the new Yahoo! software. The Samsung model will be the first to hit the markets, during the second quarter of 2009.

Many companies are using this year’s CES to unveil connected TVs, which offer some sort of Internet or network connection. LG, for example, announced a similar technology this week that will allow users to view Netflix internet video directly from their television sets; some speculate that, with the enhanced functionality of these TV sets, there will be a strong demand for more versatile remote controls, possibly featuring advanced touch controls.

Yahoo! has already built 20 widgets, including YouTube, Twitter, eBay, MySpace, Amazon, CBS, and The New York Times website, but Yahoo! representatives expect the number to grow to about 50 before June. The new Yahoo ConnectedTV widgets will be downloadable for free when the first connected TVs hit the market, and will have to be created by third parties using a software development kit provided by Yahoo for this specific purpose. Yahoo hopes to make its money in advertising and profit-sharing agreements with those third parties.

Yahoo! developed the technology in collaboration with computer chip making colossus Intel. “We believe bringing MySpace to the TV will transform the way people think about social networking and provide a seamless experience for users to enjoy MySpace while watching TV,” said William Leszinske Jr., general manager of Intel Corp. (INTC)’s Digital Home Group.

“Yahoo has combined key attributes of the Internet, including openness, community, and personalization, with the power of television,” said Patrick Barry, VP of Connected TV Yahoot. “By creating this revolutionary new Internet experience and combining our technology with the global distribution of major consumer electronics partners, we enable consumers to access the relevant information and content to enhance their television watching experience.”

The market potential for the gadget is quite a big one, even with the ongoing financial crisis: Samsung alone will be selling them in 13 countries, and the total figures for all manifacturers should add up to several millions of units according to analysts’ predictions.