It has a gas engine, but a substantially larger battery than the standard Prius. It uses the battery up first, then switches to gas. drive less than the range before recharge and obviously zero fuel gets used. We pay about 30 bucks a month total for the extra electricity.
Typically the battery is good for about 40-ish miles depending on terrain, speed and driving style.
It's nice and torquey, and has decent acceleration, feels comparable to a 250-300hp car of similar size. Interestingly, there are other cost savings that come from having an electric car... no tune ups, no warming the car up in the mornings, brakes last a lot longer, no oil changes etc..
She's driven it about 20k miles now and haven't had to service it once for any of that stuff.
This is from a while back, but it's pretty consistent with my wife's daily driving. (six gallon gas tank)
There are actually several cars on the market that get around 100mpg-ish depending on your driving style. The new Prius hybrid has as larger battery, there is a Honda Accord hybrid, and interestingly enough the new Malibu uses a passive hybrid system. (they're calling it 'mild hybrid', and I think it represents an interesting direction.)
Truthfully I suspect this is the next true iteration of cars. It won't bring down the price of fuel as demand is still strong both here and overseas, but it will reduce overall consumption, and as a pleasant byproduct, pollution.