Hi!
  I want to put a "Lite" or demo version on the web, but what belongs in it?
  Is it the background that will entice the reader of the "Lite" version to buy the full game?
  Does it matter if it is just a glorified sales brochure?
  Does it have to be a playable game?
  Does anyone have any good/bad experience with this? I would hate to have to re-invent the wheel on this one...

If its a demo version it should absolutely be playable.  Don't portray your setting in an encyclopedic or gazette fashion.  Instead focus on flavor, mood, color, ambience. If you have some good mood setting art (not cool character poses) use those.  Other things I've seen that can be effective are lists of inspiration.  What would the soundtrack for your game be, or what movies or novels are you trying to evoke.

My recommended approach, come up with really cool archetypical scenario that showcases the strengths of your game.  Include premade characters (so you can skip character design rules) and just enough of your core mechanics to run the scenario.  If you have some complicated subsytems don't create characters or a scenario that requires them.  But if you have some really cool subsystems (like the best computer hacking rules ever) make that a feature of the demo.

Make the scenario the same way you play, don't make it a "hunt the widget" scenario simply because those are easy to write (unless your game is supposed to be a "hunt the widget" game.  You want players to walk away from the demo pack with a sense of how the game will feel to play so jump the scenario into action in media res and let fly.

As an example of what Ralph is talking about, check out the demo version of Legends of Alyria that I released a while ago.  I think that it embodies the principles that he describes.  The fact that this scenario was one that my group actually played is helpful as well.

Oops, wrong link.  Try this instead.

When I'm skimming over a set of rule I like to see the basic mechanism. So for instance if it is a dice pool game I'd like to have that mechanism briefly described. I like that because it makes it easier for me to explain the game to new players.

What sells the game though is the color and setting. I bought Gamma World in the 1970's because of a picture of mutant bunnies with rifles. Go figure!

Another rule of thumb is only put in what you think people will actually read. When I write reports for court (to get people's children removed due to neglect) I never make it over 2 pages, there is a one paragraph openning paragraph that says everything and a final paragraph that says everything, and where ever possible graphs with color (that way when they read the last paragraph and look at the picture they get the message).

Chris Engle
Hamster Press = Engle Matrix Games

Just a question on this:

Would it be best to have a one-page overview of the entire setting,
or a page describing the immediate setting that the demo is in?

Brief overview,
or snapshot?

Immediate situation.  For demo purposes, that's all that matters, and it will be far more useful to people actually playing the demo to have the setting material they will actually use, as opposed to the political structure of the neighboring kingdom that they will never visit.