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Its a better system than the one Honda uses. The Honda can't move without the engine running. The Toyota can run off just the batteries, as well as coast downhill, engine off, charging the batteries.
The Honda system builds the electric motor into the engine flywheel. Its very compact, and mechanically very simple, but it is also very limiting. The Honda system is two generations behind Toyota's. The Honda system can be summarized as an "electric turbocharger" - the motor gets a boost when it needs power. But when coasting, or creeping, the Honda still has to run the engine. It does cut back to only one active cylinder, but you are still spinning it, and all its accessories around.
Toyota has the electric motor (actually two of them in the same case) connected to its own input on the transmission. Either (or both) can be active at any particular time. Makes for a complicated transmission, and electronic controls, but it has a real benefit. The Toyota has electric ONLY operation available to it. It can do without the motor when demand is low. (in stop and go traffic, it can go minutes without the gas engine running). The electric motor will also act like the electric turbo that the Honda has.
The Honda is much better looking than the latest Prius. I have owned a (non-hybrid) Honda in the past. (two of them, if you count the two wheeled variety) Our prius has been pretty reliable (had a wire break in the ABS system). A friend who has owned the Honda for a few years should be by tomorrow, will ask him about it.
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