Pellet stoves are very similar to new wood-burning and new gas heating stoves.
They provide the look and the feel of wood fire with lower maintenance requirements than wood stoves, and come as free-standing stoves or as fireplace inserts.
New pellet stoves are fed automatically; they use internal storage containers that can hold up to 100 pounds (50 Kgs) of pellets or more. And that and the rising energy costs of fossil fuels explain their popularity in Europe or in the North-America, where about 800,000 homeowners are using them.
They can be install at multiple locations, and vary in their capacity. They are able to quickly heat up a large room or even an entire house. All depends on the capacity of the stove and the size of the house, and your goals.
The quality of the pellets is important for the performance of pellet stoves. Elements like the ash content should be considered: premium pellets have a small ash content (less than 1%). See: Wood pellet Efficiency, Prices and Availability.
Emissions and Performance
Contrary to old stoves and fireplaces, they do not emit large amounts of toxins and other pollutants, and require very low maintenance.
But, on the other hand, they are not very different from new wood heating stoves and, most of all, from new gas stoves (new gas stoves burn so cleanly and emit so little pollution that - in the US - are not subject to the legal framework of wood stoves).
And that raises some questions: are pellet stoves a better option than new wood or gas stoves? Or than traditional central or ductless furnaces, boilers or heat pumps? Or, in more general terms: do pellet stoves make sense, in modern homes?
A possible short answer is that pellet stoves are a good choice for those interested in preserving the look and feel of wood stoves, or in replacing an old and inefficient stove or fireplace; otherwise there are better choices. After all, pellet stoves are not very different – in what concerns safety, efficiency or emissions – from modern gas and wood heating stoves.
Pellet stoves vs. gas stoves
Pellet heating stoves are not without their share of problems. Some become noisy and less efficient with time, and the prices of pellets vary a lot from region to region. See: Wood Pellets.
Gas stoves are less prone to noise, and emit less soot and air pollution, and are at least as safe as pellet stoves (closed-combustion models; see: Direct Venting Vs. B-Venting).
As to economic advantages, they vary from region to region; overall there isn't any clear advantage of any of these types of stoves. And both gas and pellet stoves can run so cleanly that they aren't subject to certification (USA).
Whatever the type of of stove you choose, consider a good brand and a combustion-sealed unit with the highest energy-efficiency possible (UL listed models; a certified pellet stove model: EPA-certified wood stoves, in the USA). That's often the more important.
See, for more details: Gas Stoves Efficiency.
Pellet stoves vs. wood stoves
As mentioned earlier, new pellet stoves are fed automatically, and are safer and more energy-efficiency than wood stoves.
But they are also more expensive and they do not burn… wood (and pellets can be hard to find in some areas, or some parts of the year). Besides, most pellet stoves require electricity, which is a problem during power failures.
Pellet stoves are a great alternative to old and inefficient stoves and fireplaces and a good choice to heat individual rooms, or even entire homes with very high levels of insulation, preserving the look and feel of wood burning appliances.
But there are other direct alternatives, even in conventional homes, with low levels of energy efficiency: modern gas stoves can be cleaner and more efficient; and direct-vent wall gas heaters are often a cheaper and better choice for mild climates and homes with very high levels of insulation. See: Wall gas heaters.