The lights have dimmed and the event is about to begin.

Steve Jobs has walked out onto the stage, looking as gaunt is he did at his last appearance. He seems to have a bit of a limp, and his voice is weaker than usual. In a nod to the concerns, he says, “Before we begin, I just wanted to mention this:” Onto the screen flashes a message, “The reports of my death are greatly exaggerated.”

Now, on with the show.

Jobs is talking about the iPod/music ecosystem, and says there are now 3,000 apps in the iPhone store, and more than 65 million accounts in iTunes. Now Apple is the number-one music distributor in the U.S.

Apple is adding HD TV shows at $2.99, $1 more than others. You can watch them on your computer. Also, NBC is coming back to iTunes, with The Office, Monk, Battlestar Galactica, Heroes and more. They’re coming in both standard and high def.

Apple is also introducing iTunes 8. It will have HD, accessibility for those with disabilities, new browsing, and something called Genius. You can look at your albums by album cover, and skim them that way. (It’s a little distracting that Steve’s voice doesn’t sound as it normally does. I’ve been going to these events for nearly 10 years, and this is the first time he has sounded this different; his voice isn’t just strained, it sounds pinched, and slightly higher-pitched.)

Genius automatically puts songs together that go together, with just one click. He’s demonstrating it. A Bob Dylan song gets matched with tunes by Springsteen, Joni Mitchell and Beck. It works by tapping into the iTunes Store in the cloud. Information about your iTunes library goes anonymously up to Apple, mixes it with info from other iTunes users, and gets a sense of what songs people are putting together in playlists and libraries.

He’s demoing the genius feature. He plays a John Mayer song, “Gravity.” He presses the genius button, and gets 24 songs including “How to Save a Life” by The Fray. Next he picks Heartbreak Hotel by Elvis, and gets songs including “That’ll Be the Day” by Buddy Holly, “Goodbye, Yellow Brick Road” by Elton John, and “Oh, Pretty Woman” by Roy Orbison.

Now, on to the iPod. NPD in July showed Apple with 73.4% market share. “Other” had 15.4 percent, and SanDisk and Microsoft rounded it out. He’s talking about the iPod ecosystem, and says the accessories business is booming: “they announce products even before we want them to,” he says, a nod to the accessories for the new widescreen iPod nano. He says Apple has sold more than 160 million iPods.

The iPod classic is now 120GB for $249.

Now on to the nano. The new nano, as expected, has a larger screen with a high-res display in portrait mode, and he calls it the thinnest iPod Apple has ever made. He pulls one out of his pocket. It looks nice on the big screen. Features: A new curved aluminum design, with curved glass over the display, an accelerometer, and the ability to create genius playlists even when it’s not connected to iTunes. (With the accelerometer, you can turn the nano to flip a photo to landscape mode, a popular feature from the iPhone and iPod touch.) There’s now a voice recording app that, when it detects a microphone, lets you record notes to yourself.

He’s demoing it. He picks a song from Beck, “Guess I’m Doing Fine.” Then he picks, “Don’t Think Twice, It’s All Right” by Bob Dylan. The iPod has automatically organized his songs based on what goes together. Now he demos a feature called “shake to shuffle,” that plays a random song when you shake the iPod in the air. It plays something from Dean Martin when he does; he says he didn’t really want us to know he has Dean Martin on his iPod. Battery life is 24 hours for music, 4 hours for video. He’s now touting the iPod’s green credentials, focusing on toxics: they have arsenic-free glass, they’re BFR free, Mercury free, PVC free, and highly recyclable. The new nanos also come in nine rainbow colors that are the brightest, most candy-colored yet. Colors include purple, blue, green yellow, orange, red and pink. 8GB for $149, 16GB for $199.

New headphones: A pair with a microphone, for $29, shipping next month. Also, new in-ear headphones. They’ll have a woofer and a tweeter in each bud (so, higher quality than standard) for $79.

Now, he’s showing a new ad. The nanos sort of float through the air, playing music, video, and showing photos. At the end, the multicolored word “nano-chromatic” flashes on the screen.

Now, the iPod touch. It’s thinner, with a stainless steel design. What’s different: integrated volume controls in the side, a built-in speaker (this is not for audiophiles, he says) and the genius player built in. Now there’s a built-in receiver in the iPod touch that will make it work with the Nike + iPod system that lets people chart their running workouts. He demonstrates the genius playlist feature on the iPod touch as well.

On to the app store: users have downloaded more than 100 million apps so far, in 60 days. “This is mind-blowing,” Jobs says. “Most importantly, games,” he says. (Interesting thing for him to say. Why are games most important? Because they’re most popular?) He notes the app store’s availability in 62 countries.

He’s now demoing the touch, making a genius playlist off of Green Day’s “American Idiot.” Now he goes to movies, and shows Iron Man. (Seems it might have had a little trouble with the graphics-heavy scenes; the audio and the video might have gotten a little out of sync.)

Now Phil Schiller, senior marketing VP, takes the stage to demo some games. Jobs leaves the stage. (He had been on stage doing demos for more than 30 minutes, which speaks well for his energy level.) Schiller starts with Spore, a highly-anticipated game where you create an organism and try to use it to take over the galaxy.

Next, he demos Real Soccer. (The graphics are pretty darn good — they look about the quality of the original PlayStation.) He demos the ability to do a strong kick using the touch controls, and scores a goal.

Now, Need for Speed Undercover, a racing game. He picks a Porsche, and supes it up. It starts with a nice-looking street sequence. He hits the turbo button, wipes out and gets pulled over by the cops. (One out of two ain’t bad.)

Jobs is back. He says the touch gets 36 hours of battery life for music, 6 for video. “This is the funnest iPod ever,” Jobs says, flashing the words on the screen in a wink to the fact that “funnest” isn’t exactly a word. Prices: $229 for 8GB, $299 for 16GB, $399 for 32GB. He shows an ad that features the touch playing games. “You can make a pretty good argument that it’s the best portable device for playing games,” Jobs says. (Nintendo might argue with that, based on its runaway hit DS.) He says the software update to software 2.1. If you’ve paid for the latest update, the update is free; if not, it’s $9.95. The update is free to iPhone owners, available this Friday.

Back to iPod + iTunes. Jobs is saying Apple is ready for the holidays based on all the announcements. Now he’s doing something he always does at music events: inviting an artist out onto the stage to perform at the end. He’s sold more than 16 million albums, Jobs says, and he’s the #1-selling artist in iTunes history. Jack Johnson. Johnson comes out with an acoustic guitar, plugs it in, and stands in front of the mic — and sings.

To wrap up, the surprises here were just about all software — the genius feature, the shake to shuffle, and iTunes 8 with HD. (The headphones were sort of a surprise, but they’re not big news by Apple standards.) Based on that, fair or not, a lot of the headlines might focus on Jobs’ health. As I noted earlier, he seemed to be ailing still, but his energy level was good enough for him to handle stage duties for nearly the entire show. I’d argue that the focus on Jobs’ health has merit because of his unique value to Apple. He’s certainly the creative force behind a creative company, and if he were to take a lesser role at Apple it would have a significant effect on the way the company operates.

Wall Street found reason to be disappointed in the event; as it drew to a close, Apple stock was down more than 3 percent. It began its descent right about the time the event began.

Back to the event: After two songs, Johnson is thanking Apple for iTunes, saying it’s a big reason why he gets to keep playing music. (This runs counter to the party line from the music industry, that Apple is destroying the music business with its heavy-handed control of its iTunes store. Recording industry execs have tended to want more power to price popular songs above $1 per track, and sell less popular tracks for less. Apple has insisted that by pricing most everything at $1, it has helped simplify digital music and attract people to it. I tend to agree; before iTunes, digital music was all about piracy; and now, as Jobs noted, Apple is the top seller of music in the U.S. Of course, to be fair, Apple doesn’t make much of a profit selling music, and mostly uses it to get people to buy iPods.)

Jobs comes back out to close the event, and Eric Clapton’s “Layla” – the fast version – is piped through the speakers. Show’s over.