An inverter is a central component of any alternative power system that requires alternating current power. Inverters transform low voltage 12-volt DC power to standard 120 / 240 volt AC current draws in modern appliances and tools. Inverters switch DC back and forth to make AC power, which is then filtered, and transformed and stepped up or down to match the desired waveform. More processing makes for a cleaner output with fewer voltage spikes, but reduces the overall efficiency of the process.
Modern inverters come in two basic types - modified sine wave and pure sine wave. A modified sine wave is close but not identical to the waveform that comes from your public utility. Modified sine wave inverters can run most household appliances including TV's, stereos, lighting, computers, etc. Pure sine wave inverters produce a waveform that is identical to and in some cases better than what you get from your public utility company.
Modified sine wave inverters do less processing of the power; this can cause some devices (laser printers, tools with variable speed motors, and similar items that need an abrupt pull on their power demands). Pure side wave inverters are more expensive, but won't cause "laser printer brown outs" or "table saw brown outs" when running off them. Because they do more processing of the power, they're less efficient overall.
When looking at inverters, of either type, they have two capacity ratings. One is the continuous output rating, the other is the surge capacity rating. Continuous output rating is how much power, in watts, the inverter can provide for hour after hour. Surge capacity rating is how much power the system can deliver for a short period of time. You'll need decent values for both – the continuous output rating limits how many devices you can have running at once; the surge limit is useful for appliances like refrigerators that need more power to start up than to keep going after they've started. Larger inverters (up to 10,000 watt monsters, useful for running a small building) are more expensive.
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John Horning specializes in reporting on do-it-yourself solar power projects and related topics. Visit his website at DIY-Solar-Power.net.