First, FUD: Fear, Uncertainty, and Doubt. The purpose of FUD is to cause recipients to forgo decisions that might be facilitated by confidence. One story of the origin of FUD is that a former IBM executive, running a competitor, created the term to describe how IBM prevented customers from choosing to buy services from his mew company. FUD is essentially a (dis-)information campaign to prevent confidence-building among potential adopters of hostile ideas, and to delay action.
How FUD Works: It's Marketing
Marketing involves bringing a target audience through a series of mental steps culminating in action consistent with the marketer's plans. The steps are sometimes discussed as part of a marketing communications spectrum. Assuming you are Apple and you want the audience to buy iPods, you want possibly oblivious members of the public to acquire awareness that there's a more-portable music-listening alternative to the Compact Disc, you want comprehension of the benefits of CD-free music listening and of the various iPod devices in particular (the click-wheel; the iTunes synching software; the store's ease of use if you want to buy downloads instead of encode existing CD collections; etc.), you want them to reach a conviction that some iPod is right for them, and you want specific action: adoption of an iPod by purchase.
The silhouette advertisements are all about awareness: Apple has a music product. The iPod will play music. People who know this are in a position to learn more if they care about music products. Comprehension -- the "learning more" -- is aided by some of the slogans, "5000 of songs in your pocket" (or whatever the number was in whichever ad you saw), but the nitty-gritty seems to be communicated by web pages and retail salespeople. The more you see folks actually using an iPod without adverse incident, the more likely you are to comprehend, and if having your own music collection with you is important, conviction is a short step away. Then, it's about making action convenient: Apple puts iPods in as many venues as possible.
If you can't cause the public to un-see the silhouette or other advertisements, what can you do to thwart a competitive advertising campaign? Awareness is hard to attack without actually enhancing awareness. Car ads that refer to specific competitors are an example of this. A bad Chrysler ad might actually encourage a prospective SAAB buyer, perhaps convincing the SAAB buyer that the SAAB product is so highly regarded that even competitors think it's the team to beat. BMW used to brag that it was the brand most mentioned in competitors' advertisements. How do you avoid this problem?
You can't un-teach people about the fact BMW makes a car, or that Apple makes a computer, but you can confuse their comprehension and prevent their convistion. To the extent you prevent people from moving along the road of marketing communication toward conviction, you can impede unwanted action.
Initial FUD against Apple on the launch of the iPod was interesting. First, before there was an iTunes Music Store, the stories that came out on why not to buy an iPod included (a) it's expensive (this undermines conviction, as it makes action impractical if it's true; and if it's widely-believed, it makes people feel that adopting the product will cause them to be viewed as fools for overpaying) and (b) it'll be obsoleted when all the new music comes out in Microsoft-only DRM. (Yes, at the time the iPod came out as a non-DRM player, there was talk that all CDs would go DRM, and WMA was being pushed by Microsoft as the natural leader because "everyone knew" Microsoft was the "leader" in proprietary file formats.) Apple reponded to this by launching the iTunes Music Store (originally the Apple Music Store) to provide reassurance that iPod customers would always be able to buy music (no matter what happened to CDs) and increasing the price/performance story as drive sizes increased and components became cheaper. Subsequent FUD still trumpeted price differences, but began emphasizing that Apple's music format enslaved iPod owners to use only Apple's music store, or would lock iTMS buyers forever into buying iPods. The fact that tech writers knew nothing about file formats or the history of the iPod's development didn't help; lots of FUD probably originated in inartfully-worded descriptions of the various music players' access to online stores. Some of this is described at Daring Fireball. The last serious effort at iPod FUD was Microsoft's effort to pitch iPods as music theft vehicles, apparently an effort to give aid and comfort to those hoping to impose taxes on music players or impose per-player licensing fees to impair Apple's growing business. The fact that Microsoft got stuck with a per-player licensing fee may encourage scadenfreude at the possiblity of sticking Apple with a similarly-bad deal down the road.
By now the FUD on the iPod has dwindled to comments on Apple's ability to grow profits from a unit volume that is already enormous, in an environment in which component prices (and thus average sales prices) are falling. This may be a legitimate comment on the ability of Apple to grow iPod-related profits, but then again, Apple can use the iPod to bring enormous populations from unawareness to awareness of Apple products and their quality.
I offer the iPod FUD example to show that it doesn't always work. There was a similar FUD effort in IT departments that lacked Mac expertise against Apple computers, which basically went: why invest in Apple hardware, when everybody knows the company will be out of business soon? In 1997 this was plausible FUD.
We get FUD from anyone worried about consumers achieving conviction. When Microsoft feared operating system competition as it fought to gain enterprise share, its claimed software product pipeline -- announced to assure customers there was no need to leave for competitors' products, and no point to spending money on migration to a superior platform in light of any-minute-now release of improved Microsoft product -- won Microsoft a vaporware award. A Microsoft employee's self-evaluation form depicted a self-congratulatory description of a decision to nullify the first-mover advantage of competitor Borland by pre-announcing non-existent produsts with aggressive marketing, suggesting that the competitor's new product will soon become obsolete.
That's why the Microsoft-controlled DRM story was so powerful when iPod was first released: it suggested that the trend in all music was toward DRM, and that Microsoft would be the vendor which would win the format war, so (a) the profit to be made in players would be collected by Microsoft rather than player manufacturers, just as occurs with low-cost PCs, and (b) Apple's music players would be unable to play future music that would depend on these not-yet-released standards that were sure to be based on .wma, which iPods didn't play. The upshot was that iPod was thought by many to be dead before it had made any sales. The need for Apple to protect its ability to sell players by establishing a recognizeable alternative music venue was obvious. What Apple didn't expect was in a few years to be America's largest music vendor.
The epitome of vaporware as FUD is the announcement of a non-existent product to prevent customers from rewarding a competitor's innovations, when the FUD vendor has no actual plans to release the products it claims will obsolete the innovator. In other words, announcing a product with no intent to release it, but only intent to sabotage competitive products' launch. That's real vaporware.
Is There FUD Outside Tech?
Oh, yes. FUD is the entire basis of negative political advertising. People want to vote for a candidate that makes them feel ... well, if not confident, then at least not queasy. The best FUD makes people nervous about competitors' prospects.
Remember the Hillary Clinton ad about control of the nuclear button? Who will make the decisions when your children are asleep? The ad didn't work -- indeed, when the girl in the ad was revealed as preferring Obama as the Democratic candidate, it backfired -- but the design of the ad was perfect. The problem is that neither candidate really had any experience managing anything the size of the federal government, or the expertise making decisions about anything as lethal and unretractable as emergency late-night last-minute United States military action. The FUD just didn't stick.
The key here is that FUD requires your story to be plausible. You need to tell a believable story with your FUD. Of course, ideally you don't just pump out FUD, you tell the truth --
Start with the truth. Identify the worldview of the people you need to reach. Describe the truth through their worldview. That's your story. When you overreach, you always fail. Not today, but sooner or later, the truth wins out. Negative or positive, the challenge isn't just to tell the truth. It's to tell truth that resonates.However, I have some bad news for you. Neither our "news" industry nor any other major outlet has figured out how to make money on truth. The truth can be difficult to ascertain, costly to verify, challenging to convey, and uninteresting to the masses. By contrast, scary stories are worth a mint: bombs, murders, carjackings, rapes, drug kingpins wreaking havoc on helpless neighborhoods, corrupt officials hijacking the instruments of public policy to advance the interests of political supporters -- these stories make the headlines not because they are truer or more common, but because they help sell more advertisements than Boy Scout waters disabled neighbor's plants, doctor saves girl from hard-to-diagnose but often-lethal infection, child makes A on test after diligent study, old man learns to surf, couple has great sex, philosophy major gets paying work with his degree, dog saves owner from medical emergency, cat wakes owner from fire, bird finally learns to sing Happy Birthday, best-friends-forever have first sleep-over and loved the breakfast pancakes the next day ...
from Seth's Blog
... the bad news is just more alarming, glues eyeballs better, and thus sells more ads. It's harder to tell you have truth than to see you have an exciting story. The result is stories that selected for attractiveness rather than stories selected for truth.
As long as FUD is scary or exciting, it'll be remain more attractive than potentially boring truths.
 The expense of the original iPod is an interesting point. Although it was costlier than other hard-drive-based players, it was the only hard-drive-based player at the time using a 1.8" hard drive, so it was the smallest; the retail price of the hard drive inside the iPod was actually so high that some people tried buying iPods to scavenge the 1.8" hard drives from the players. In short, considering the market price of the iPod's components, the player was dirt cheap. The fact that a person willing to carry a heavier player could do so for less money was, however, true.