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As a marketing tool, publishers provide free copies of new titles to booksellers, journalists and even celebrities.
Such a book is variously referred to as a reader's edition, an advance copy, an advance reading copy, ARC or ARE. It's the book privately released by its publisher before the book is printed for mass distribution.
Readers' editions generally lack the final dust jacket, formatting or binding of the finished product; the text of an advance edition may also differ slightly from the market book, after comments are received from the reading group, or late errors are found in the manuscript. When a celebrity reader or journalist gives an endorsement, that's added to the dust-cover and other promotional items.
Reader books are normally distributed three and six months before the book is officially released to reviewers, bookstores, magazines, and (in some cases) libraries.
Book collectors typically seek readers' editions, seeing them as the "real" book, possibly containing text errors or typos that add value, as coins or stamps with errors do.
On rare occasions (for instance, on the publication of an eagerly-awaited or controversial book), a publisher may require the recipients of advance copies to sign a confidentiality of content agreement. However, in most cases the sheer number of ARCs produced and distributed makes that impractical. A typical genre publisher may create 5,000 ARCs for a new book by a moderately popular writer.
Publishers now produce 'uncorrected proofs', or bound galley proofs, which are sent out as ARCs before publication. Galley proofs were once only used in the editing and proof-reading process. Publishers have recently been using uncorrected proofs more and more, with bindings and illustrations similar to those of the final copy, whereas old-style galley proofs were usually bound in plain paper covers without illustrations. Galley proofs are generally printed in black and white and are significantly larger than their market book counterparts.
The term 'uncorrected proof' appears on the ARC cover. ARCs are printed in full color and in the same format as the published book. Publishers who produce their galley proofs in electronic form do not use them as ARCs.
Digital Advance Copies 
With the rise of ebooks and ereaders, it is now common for ARCs to be distributed as ebooks, via websites such as NetGalley. Both traditionally published and self published advance copies are available for distribution through NetGalley.
1.^ http://www.librarything.com/blog/2007_05_01_archive.php 2.^ Ryan Donnell, Oct. 13, 2005, New York Times, Review: 'Marley & Me' 3. http://www.lopezbooks.com/catalog/pr/static/?page=2
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