Format overview
Topaz is an entirely proprietary format. It is not related to MOBI/AZW at all, not even as much as AZW4 which uses a palm container. It is the output of an automatic conversion of scanned text images in a manner similar to the DJVU format. More precisely it is like IW44 which is a simplified subset of DjVu. Like DjVu, it is a collection of character images (not really a full blown font, though the glyphs are represented by curves, not bitmaps), with the ASCII code stored along-side. What is displayed is the average glyph constructed from the cluster of all similar glyphs seen in the scanned input. It is compressed using a high compression format.
A .tan sidefile is used to store metadata and bookmarks and other user generated content on the eBook. The metadata is used to help the library mode to reference information about the eBook itself.
It uses a different compression than standard MOBI files and it inherently has embedded fonts in the file allowing more complex display using font sets and characters that are not standard to Kindle. It is also likely to remove other restrictions found in MOBI files such as image size limitations although some of these may have been removed in AZW as well.
Most agree that Topaz is a collection of glyphs arranged on pages, along with an unproofed OCR text version. It is used to make older books and foreign language available quickly, since conversion is essentially automatic from scans of the pages of a book, but it reflows very well.
 Source Format
This is an eBook in the Topaz (TPZ) format that has been delivered via Whispernet.
This is an eBook in the Topaz format that that been delivered via Internet download.
 Scanned books
The newly available Amazon convert program "Kindle Convert for PC" seems to build these kinds of books from paper books and a scanner. They are identified as being for personal use. This has not be verified yet.