LilyPad Arduino is a development board like other Arduino. It was specially designed by Leah Buechley and SparkFun for sewing on fabric. The board uses ATmega168V (low power version of ATmega168 (datasheet) or ATmega328V (datasheet)) microcontroller.
LilyPad Arduino can be programmed (download) with the Arduino software environment. Note: LilyPad Arduino can be programmed with 0010 and higher versions of the Arduino IDE. It can also be programmed with previous versions, but time-related functions will not work (runs 2 times slower than they should)
The ATmega168V or ATmega328V on the Arduino LilyPad comes with a bootloader that allows you to upload new software with the Arduino IDE. You can skip the loaded bootloader and program the ATmega’s on the LilyPad Arduino from the ICSP (In Circuit Serial Programming) output. I’m preparing an article on how to do this, it will be online soon.