What are great examples of products/ideas that failed or rejected at first because people didn't understand what they do?

The KiddiComp concept, envisioned by http://en.wikipedia.org/wiki/Alan_Kay in 1968, while a PhD candidatehttp://en.wikipedia.org/wiki/Dynabook#cite_note-1 and later developed and described as the Dynabook in his 1972 proposal A personal tablet for children of all ages It was today's tablet targetted at children A typical case of brilliant product whose time hadnt come, just caught in the wrong era :)

Another example is Netflix, in the 1999 when Netflix decided to use Blockbuster distributions channels in a merger they were laughed at by Blockbuster executives but with a great marketing plan and help of few investors in 2010 Blockbuster filed a bankruptcy and Netflix had 66% increase in subscribers

Post-It notes. In the 1960s Spencer Silver was working at 3M, and accidentally invented an adhesive that stuck. But not very well. No one used this for anything (who wants glue that doesn't work?) In 1974, Art Fry discovered them and used them as bookmarks. In 1980, they were manufactured. But people didn't buy them - they didn't see the point. The marketing department gave offices free post it notes. Once people have tried them, they see the point and want more.

This might not be quite what you are asking for, but this is common in the film industry.  Films that are eventually considered ground breaking classics bomb on original release because they are too different and the machine has no idea how to market them. Three of my favorite films all went through this: 2001 Fantasia Alien There have been many more. edit: More in line with what i think you were thinking... there was also Videophone AT&T tried a pilot program with video phones in New York City in the 60s.  The consumers hated them.  The most common comment was from women and was of the form, "I'm going to have to put on makeup and do my hair just to answer the phone?" An invention that was too early for society.