The first main difference is that the ShiftBrite uses an inexpensive chip that doesn't require any flash programming during assembly. The BlinkM uses a microcontroller that probably doesn't cost more than $1 or $2 more, but it does have to be programmed before shipping to the customer. These two factors make it possible to get a very low price on completed devices, though I have no idea what that raw cost is for the BlinkM.

The second difference is that an array of ShiftBrites is a series of latched shift registers, rather than BlinkM which is I2C and can be thought of as a star diagram. Since the ShiftBrites are in series, the identity of an LED is defined by its position on the string. The BlinkM requires you to program an address into the LED before it can be uniquely addressed. The BlinkM allows you to send a command to one LED at a time, but the ShiftBrite requires you to command every LED in a string even if you only want to change one. Fortunately the ShiftBrite data clock can be several megahertz, so commanding LEDs should be at least as fast as the BlinkM 100KHz I2C bus. The microcontroller programming require for commanding a ShiftBrite is very simple in comparison to the BlinkM; the user only needs a simple serial clocked shift register and latch pin, and does not need to implement the I2C protocol.

The third main difference is the scripting software and standalone mode of the BlinkM, which don't exist on the ShiftBrite. Typically, someone using a ShiftBrite will get the most value if they want to use three or more on a string, and need to fully control them from their own microcontroller. If you only need one LED and want standalone scripted actions, the BlinkM is more compact and economical than taking a ShiftBrite and adding a dedicated microcontroller. However, this will not be the case in the second version of the ShiftBrite, which will be powering LED currents far in excess of the microcontroller's I/O port maximum.