The battle of the e-readers is heating up. Barnes and Noble has announced it has entered into an exclusive agreement to sell the upcoming device from Plastic Logic. The unit competes directly with the Amazon Kindle DX – both are about the same size – although the Plastic Logic device is spiffier in our opinion – all touch screen, no controls at all. It weight about 13 ounces.

Both the Kindle DX and Platic Logic devices are highly anticipated to become large size useful digital newspaper readers.

Plastic Logic also announced that AT&T will be providing the wireless backbone for its machine. The Kindle uses Sprint and provides it for free to Kindle owners. Will Plastic Logic do the same?

The AT&T deal is a bit strange since Apple’s uber-popular iPhone runs on the same network. If both get big, AT&T may have trouble keeping up.

Plastic Logic will also build WiFi into the device, another feature the Kindle doesn’t have. A third device – the Sony Reader – doesn’t have WiFi at all (although it does have a touch screen).

Plastic Logic talked up its deal with Barnes and Noble on Fox Business. Video here. The Plastic Reader device will launch in “early 2010,” the company’s VP of biz dev said on Fox Business.

Barnes and Noble, which is looking for any corner to cut these days, seems to be betting on e-books. Their newly announced e-book store has 700,000 titles (with plans to increase to a million by next year) vs. 300,000 at Amazon. Of those, however, half a million are public domain books from Google. Barnes and Noble’s titles won’t be exclusive to Plastic Logic reading – they’ll be open format and will work on the iPhone and iPod Touch a well as BlackBerrys and most laptops and desktops.

As a result, Amazon may be forced to embrace more formats (and we hope lower the ridiculously high prices on its Kindles).

One other cool thing announced during Barnes and Noble’s Monday conference call – a free iPod app that lets users snap a picture of a book (presumably in a Barnes and Noble store) and use that to get product details, editorial reviews, and customer ratings via their mobile device. Neat.