According to Wikipedia, a compressed air vehicle is powered by an air engine, using compressed air, which is stored in a tank. Instead of mixing fuel with air and burning it in the engine to drive pistons with hot expanding gases, compressed air vehicles (CAV) use the expansion of compressed air to drive their pistons. One manufacturer claims to have designed an engine that is 90 percent efficient.[1]

Compressed air propulsion may also be incorporated in hybrid systems, e.g., battery electric propulsion and fuel tanks to recharge the batteries. This kind of system is called a hybrid-pneumatic electric propulsion. Additionally, regenerative braking can also be used in conjunction with this system.

Tata's compressed air cars might sell for less than $13,000. To paraphrase Paris Hilton, now that's Hot.