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LED monitors are an evolution of the older LCD monitor technology. They are more energy efficient and provide brighter, more vivid colors than traditional LCD panels, and are lighter, thinner, and more energy efficient.
LED stands for Light Emitting Diode. This is a reference to the backlight technology used to produce the image.
They work in almost the exact same way as a LCD panel does, except that the backlight is different. Rather than using cold cathode fluorescent lamps, they use light emitting diodes. These shine behind two glass layers which sandwich a panel of liquid crystals. The liquid crystals have an electrical charge run through them, which allows the light to pass through them to the second layer, which contains filters which help produce the image.