For as little as $7.99, you could replace a broken smoke alarm. Spending $129 may seem insane, but that’s before you learn about Nest Labs, which is reinventing what a home appliance can be.

Not long ago it was common to get a cellphone for free or almost nothing. Then spending several hundred dollars became common as the iPhone reinvented what a phone could be, and improved your life. Nest Labs is doing the same thing. The company has a thermostat on the market and offers pre-orders for Nest Protect, the $129 device that detects smoke, heat and carbon monoxide levels.

Here’s what makes Nest’s smoke detector so great.

Nest Protect takes the nuisance out of dealing with false alarms. Simply wave at the alarm, and it will shut up. The idea is to prevent frustrated  customers from deactivating their smoke detector and putting themselves in harm’s way.

Nest Protect doesn’t screech like a traditional smoke alarm. It beeps and says things such as “Heads up, there’s smoke in the bedroom.” There’s also a nightlight function, which will automatically light your path in the evening.

If Nest Protect’s batteries need replacing, it will send a message to your smartphone instead of chirping at all hours of the night. The device connects to your WiFi network.

Nest Labs began for the right reasons.

Does a product solve a problem? If not, there’s no need for it. The back story:

[Tony] Fadell was building an energy-efficient home near Lake Tahoe in California and went looking for a thermostat. Those he found had limited features and looked like they were stuck in a time warp. He started thinking about how they could be improved. Soon he realized that he had the makings of a new business, and together with Matt Rogers, a former Apple colleague, he created Nest Labs in a Palo Alto garage.

Nest Labs can make home appliances cool.

Smoke detectors have long been a commodity. Consumers don’t see much of a difference between a $7.99 smoke detector and a $14.29 smoke detector. Most of us can’t name multiple brands of smoke or carbon monoxide detectors. The only perceived difference is price.

Nest Labs is positioned to change the status quo because it taps into the “Internet of Things” trend — in which sensors and microchips appear in everyday objects such as smoke detectors, refrigerators and thermostats. Plus its CEO is a proven innovator.

What’s on Tony Fadell’s resume? Oh, just the iPod.

CEO Tony Fadell spent nine years at Apple and led the team that built the revolutionary iPod. He’s shaken up industries before and understands how to do so.

He spoke Tuesday at the GigaOm Roadmap conference, and said this about Nest’s work:

“It takes time to break out of existing models. So 1.0 Internet of Things, like refrigerators that have tablets on them. Why is that any better? They don’t rethink the experience from top to bottom. It’s not just about connecting things. It’s about the experience.”

Could a smoke alarm or thermostat be the hot gift of the 2013 holiday season? Probably not, but never say never.