I saw an article about gDiapers in Inc. magazine. Apparently they're an Australian company that has created a disposable, eco-friendly diaper. You can even put wet diapers in your home compost pile and they will decompose in 50-150 days.
We don't have kids yet, but it seems pretty interesting. Better than disposable (which I guess take 500 years to decompose) and more convenient than cloth diapers (which I still say I want to use, but we'll see how dedicated I am).
Here's their site for surfing purposes.