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E-ink screens only have 16 shades of grey. That's why you see the banding instead of smooth gradients. Most readers now do an exclent job of dithering images so they look smooth, (like the old ink jet printers.). Sony has done that for a long time (at least, since the prs-650). Kindle only started doing that after one of the patches on the Touch. (the original touch firmware looked just like the Kobo.). Kobo hasn't really improved the rendering of image shading yet, however.
Edit: actually, most all printers, old and new alike, use dithering. I don't know why I thought of that comparison.
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