The most expensive and most innovative component of the XO-1 is its display. It is a 7.5 inch TFT with two operating modes: With the backlight turned on it can display approximately 800x600 coloured (6bit: 262k colours) pixels. With the backlight turned off, it becomes monochrome (6bit: 64 shades), but the resolution goes up to 1200x900 and the screen is usable in bright sunlight.

This peculiar behaviour is due to the interesting way the display is constructed: The LCD is a 1200x900 grid of square pixels with 64 levels of opacity. Behind it is a reflector, that sends incoming ambient light back through the LED. So when the backlight is off, all you see is the high-resolution monochrome screen. When the backlight is turned on, it first goes through a fixed colour filter that tints every pixel either red or green or blue. In a completely dark room, all you see are 1200x900 pixels of fixed colour (but 64 shades of opacity), or, if you group three of them together to count them as one coloured pixel, approximately 800x600. In most situations, and depending on your viewing angle, you see a combination of both.

Another interesting feature of the display is that its controller has enough memory to keep the screen alive while turning off the CPU and other parts of the motherboard. This can save power in book reader mode.

Speaking of book reader mode, the display can be pivoted, turned around and folded so that it closes like a lid over the keyboard, turning the XO-1 into a tablet (without the touchscreen). A game pad and cursor keys located next to the display can then be used in lieu of keyboard and trackpad for simple navigation tasks. There is also a very handy button that rotates the contents of the screen in 90 degrees intervals (normal / portrait / upside-down landscape / reverse portrait) to allow you to adjust to how you hold the device.