In an attempt to keep up with the Joneses--or Toyotas, in this case--Honda announced a considerable refinement to its hybrid system. Honda's current system lacks Toyota's ability to drive in full electric mode and doesn't seem to offer comparable economy. The newly announced system can cruise at low speed on full electric, and it includes more advanced valve timing and much lighter weight engine components. Honda claims a 5 percent increase in fuel economy and will put the system into its 2006 Civic Hybrid.
Honda's approach to hybrids is significantly different than Toyota's. Where Toyota hooks a separate engine and motors into the drivetrain, Honda integrates motor and engine in one unit. Although the Toyota system offers more flexibility, I would think Honda's integration would offer better performance. The Accord and Civic didn't prove that idea, but these new refinements might make the point.