Capsule Hotels are great places to stay for a reasonable price for 1 or 2 nights when you visit Japan. Especially in the high season when you're late and have missed out on all the hotel reservations, you don't have much of a choice...unless you want to stay in a internet cafe or sleep on the street next to inebriated Japanese salarymen like this one:
Instead, Japanese capsule hotels provide a fun, futuristic feel (althought they've been around since the late 70's) to your sleeping experience. There is quite a variety of these sleeping pods, ranging from the "not-so-pleasant" to the "whoa this fulfills everything I could have ever dreamed about Japan." Some even give you the option of having a TV and outlet to meet your needs!
Nowadays, they've become more and more luxurious. Some have saunas, lounge rooms, restaurants, you name it. Unfortunately, many of the traditional capsule hotels don't allow women, but that has already begun to change!
Take a look at some of these (nicer looking ones)!
Hotel Sleeps in Tokyo Caban in Osaka
Rumor Plaza in Kyoto Nadeshiko Hotel in Tokyo
Youtube channel Only in Japan also gives a more inside look into what its like.