The smartphone project reportedly began as far back as 2009, inspired by ways that the Wii could be hacked to track a person's head movement. The lab is said to have begun two smartphone projects, one with a 3D display that didn't require glasses and one without the 3D feature that would cost less. The phones were reportedly developed under the codenames Tyto and Otus, both types of owls. Reports of the low-cost Amazon smartphone have diminished over the past year though, and it's not clear whether it's also been completed.

According to Businessweek, development of the 3D smartphone faced a number of challenges. It supposedly creates its 3D effect by watching whoever's holding it with a series of cameras, and getting those cameras to work reliably while being moved around in someone's hand proved difficult. Lab126 apparently had some organizational issues too, but Bezos himself is said to have spent time with the lab last summer, perhaps to begin straightening things out and moving the smartphone out the door.

Echoing other reports, Businessweek says that Amazon's phone relies on four infrared cameras mounted on its front to track the phone's user and allow it to create a 3D effect. They'll apparently also allow people to operate the phone and play games using only gestures. Businessweek includes two other interesting piece of news inside its story on Lab126: the lab is said to also be working on what Stone calls a "remarkably thin" new version of the Kindle Paperwhite — one of our favorite ebook readers — as well as a Square-like credit-card reader.

But just because Amazon has the technology to put together a 3D smartphone doesn't meant that it's nailed the execution. Businessweek can't answer that, but it won't be long before we know. Amazon is holding an event where it's expected to unveil the device tomorrow at 1:30PM ET. The latest reports suggest that it'll be an AT&T exclusive, and if you're hungry for more details on the phone, we've got the biggest news rounded up right here.