Originally AZW was basically the MOBI format using the high compression option. Today this is still true but the AZW term can also be used as a generic term for Amazon eBooks without regard to their internal format. The AZW extension is used on both eBook files that are protected with DRM and files that are not protected.
Amazon supports an online bookshelf that can be used to retrieve eBooks from their web site. This bookshelf will be accessed automatically from the Kindle unit. It can also be accessed from their iPhone, iPad application and from their Kindle Reader software for the PC.
Personal files can be submitted for conversion to the Amazon web site will be returned (via an email account) as files with the AZW extension but they are not protected. Unprotected AZW files can be renamed with a .prc or .mobi extension and they will be able to be read on the MobiPocket Reader on a PC. Protected DRM files cannot be used on the MobiPocket Reader.
The Early Kindle devices (Kindle 1 and Kindle 2) can only use AZW files for protected content but can read MobiPocket files for unprotected content with or without the AZW extension.
 Internal Formats
The following file extensions can be used to define the variations on Amazon content formats.
AZW files can only be obtained from the Amazon web site. As of January 2010 there are over 400,000 eBooks available in this format. Since unprotected books are really just Mobi files some sites will advertise that they have AZW files. AZW files are sometimes called KF7 (Kindle Format version 7) to distinguish them from KF8.
AZW1 is another name for the topaz format (Also called .tpz).
AZW3 is another name for KF8 This format first came out for the Kindle Fire. This is the primary format for most current Amazon Kindle devices but they also they can also read the other formats as well.
KF8 also has a fixed layout mode which can be used to convert CBR and CBZ files with a pane view feature.
Amazon uses AZW as a generic term for Kindle eBooks so they may identify only AZW as the format supported but expect that the device will also support Topaz files (also called AZW1) and perhaps others (AZW4). However KF8 (also called AZW3) will be specifically identified if it is supported.
 DRM method
DRM on the Kindle is locked to the device id which is pre-registered automatically on an account at Amazon when the Kindle is purchased. (The device id cannot easily be seen by the user.) There can be several devices sharing the same account; thus when an eBook is purchased it can be read on all of the devices registered to the account. There can be 6 devices registered simultaneously which allows a family to share a book purchase. If a device breaks or is lost or sold the device can be unregistered at the site. You should also unregister a device if you bought it as a gift.
 Auxiliary Files
Both AZW and TPZ formats support auxiliary files which store things like bookmarks, annotations, last read position and extra metadata. MOBI (AZW) auxiliary files have .mbp extension, for Topaz it's .tan.
There can also be an APNX file containing a map of page numbers.
There is also a public highlights file (PHL). If you have public highlights turned on (See: Home/Menu/Settings/page down to find, to turn off), little dotted underlines will show in your books where other people have highlighted. For this to work the other people have set an option to allow their highlights to be registered. You can opt out of showing them by the book or globally as above. You can opt out of participating with your own highlights, but only by turning off annotation-backup. Which doesn't mean you can't highlight or annotate, just means they won't be available at amazon.
 Making AZW books
Amazon KindleGen can be used to generate AZW books. However, since the non-DRM format is the same as MOBI, you can also use any Mobi tools and rename the extension to AZW. Sometimes a MOBI book generated specifically for Amazon is called KF7 to distinguish it from KF8. This distinction is known to KindleGen which can create either or both types of books.
 Making Periodicals
Calibre generates documents in periodical format for a recipe which is uses to directly generate the .mobi / .azw file.
It is possible to generate the periodical behaviors directly in opf and ncx files for use by KindleGen. Here are a few tips:
- The top level navPoint should have class="periodical" which will cause kindlegen to make a book that's presented as a periodical.
- You can also add author names and summaries to the article list by adding these elements under each article's navPoint:
<mbp:meta name="description">A summary of this article here</mbp:meta> <mbp:meta name="author">The list of authors here</mbp:meta>
A Calibre output conversion plugin that does this job can be found at http://www.mobileread.com/forums/showthread.php?p=1666880#post1666880
For more information see: http://stackoverflow.com/questions/5379565/kindle-periodical-format