Barnes and Noble dropped the price of its Nook eBook reader today to $199 and introduced an even cheaper $149 Wifi-only Nook, sparking a price war with Amazon.

New Nook Prices. Click to enlarge

The race to ‘free’ in eBook readers is on today as the standard Nook was dropped from $259 to $199 by Barnes and Noble BKS .  The biggest news however, is that they introduced a new device that costs only $149 but can only use Wifi to pull in books.

The eBook reader is moving to the razor, the eBooks are the blades.

That means the price of entry for quality eReaders dropped over $100 today.  That opens up the market to many more people who might have previously balked at the price of a eReader.

Amazon AMZN quickly responded to today’s news by dropping the price of its Kindle from $259 to $189, sitting between the two Nook models.

As these eReaders drop in price, they are no longer really just stand-alone items priced like netbooks, but electronic accessories priced closer to MP3 players.

These devices aren’t just competing against each other.  Apple AAPL today updated their iPhones and $199 ($173 street) iPod touch to be able to use Apple’s ebook store, iBooks.

And to confuse matters, both Amazon and Barnes and Noble have apps on Apple’s iOS platform to allow users to read their content.  While the $499 iPad is in a different price league, but still attracts significant eReader customers.

While the Nook runs on Android, Amazon also has their Kindle app on the Android platform, making for an interesting situation: If the Android Market can be hacked/sideloaded on the Nook, will you be able to read Kindle books on Barnes and Nobles’ eReader?

Other eBook reader manufacturers were quiet.  Sony eReaders range in price from $169-$350.  Borders recently sold its Skiff eBook venture to News Corp.