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Deflation is a general drop in prices. It is bad for a leveraged society, because the hard assets are declining in value relative to the financial liabilities. It also has the insidious characteristic of delaying consumption. If prices are dropping 5% per year, you can afford a better car by simply waiting. That means that the level of economic activity is actually deterred by the price action itself.

Central banks will fight deflation by printing money via the banking system, but if the economic mood is bleak enough, as in Japan at present, even that won't work because even at zero interest rates, people won't borrow. But the product enhancements/bang for buck phenomenon actually result in CPI being OVER-stated. These things would actually be hidden deflation rather than measured deflation.

Inflation is too much money chasing too few goods, and prices rise.

Deflation is the opposite, not enough money, so prices fall. The danger is what happened in Japan; a vicious circle.

In the case you're asking about, computers, there is demand because there is value, and the markets reward the efficiency (of technology, in this case).

Manufacturers would be concerned if, as in the case of the tools, they were being forced to sell essentially the same product that they did 30 years ago for the same (or less) money.

But in the case of computers, efficiencies in the factory coupled with demand-driven value (faster processors and drives, etc) allow the manufacturers to sell 'more for less'. But they're not losing anything because they're more efficient (note that overseas labor must be seen as an 'efficiency' also)

A case somewhat in point is on e i had personal experience with last weekend: I went to get a part for my McCulloch chainsaw and the repaor guy tells me that instead of making their tools more efficiently (or charging a premium for having a better product), they chased the cheaper brands right into the ground...

One anti-deflationary advantage the US had in recent year that's not often mentioned is thin inventories, another plus of technology. Just-in-time inventories mean that demand can be compensated for faster and losses minimized (glossed over, but you get the idea)