Digital photo frame makers are a dime a dozen, with prices for many low-end frames falling under $100. But this fast-growing category is getting an upgrade with the advent of internet-connected frames, which are harder to do right and can come with services that consumers may pay for.

Samsung and Chumby are teaming up to create the hardware, software and services for connected digital photo frames. They are announcing the alliance today at the International Consumer Electronics Show in Las Vegas, thus joining a sea of companies pushing Wi-Fi enabled digital photo frames.

Samsung is launching the S3C6410, a new application processor based on the ARM11 chip design. The chip, which costs $12 in volume, will let developers build internet-connected photo frames that can handle pictures, videos, web sites, internet radio and rich animations.

Chumby, one of the leaders in the internet widget business (software that delivers services over the web such as a localized weather report), will provide software and services that run on top of the Samsung-based digital photo frames. Those services will let people use more than 1,000 widgets — including news, entertainment, videos, music and sports information — on the digital photo frames. These frames will have touch screens and much better controls than those in today’s frames.

There is a lot of competition here among makers of the frames. But these two companies hope to arm all of the warring camps. On the chip side, Samsung competes with Amlogic. Chumby competes with a variety of other widget makers as well.

Richard Yeh, marketing director at Samsung, said that digital photo frames are one of the fastest growing categories of devices taking the internet beyond the PC and cell phones. Samsung is focused on becoming a leader in making chips for smart, internet-connected gadgets. The idea is to let consumers access data anytime, anywhere, whether it’s at home or in the office.

It’s already a leader in the digital photo frame market, which is expected to hit 24 million units in 2008 according to market researcher TSR. Only about 5 percent of those were connected frames, according to Stephen Tomlin, chief executive of Chumby. Various industry estimates put the percentage of internet-connected frames at 15 percent to 40 percent in 2009.

The whole point is to make it easy to upload pictures into frames from cameras via Wi-Fi and to share them with friends and family through photo-sharing services like Photobucket, Facebook and Flickr. Tomlin says one of the benefits of connecting a frame to the internet is that it infinitely expands the storage, which is one of the most expensive attributes of today’s unconnected frames. Users can arrange to have their freely stored photos on one of these web sites streamed directly to the frames. With widgets, however, the sky is the limit. You could, for instance, have a YouTube widget that broadcasts a specific channel to a photo frame.

Companies like Ceiva have done this for several years, but it required customers to pay monthly fees for the service. That is expected to give way to free services with other ways to monetize. For instance, ads can be built into the widgets that people select for their picture frames.

Tomlin says that the Samsung/Chumby frames could be sold for around $200 or so. That’s high compared to the low-end sub-$100 frames. Both companies have yet to announce major customers, but they predict that frames using the solution could be on the market by the spring. Of course, Tomlin says that the connected vision won’t stop with just photo frames and that all sorts of connected gadgets are under design. The challenge is to make devices like clock radios smarter without making them as complex as laptops.