Unity is a shell developed by Canonical, the parent company of Ubuntu, for their flagship distro. It runs on top of Gnome Desktop environment and uses all core Gnome applications.
Initially it was developed to run on netbooks to make better use of the screen real estate. But when Gnome decided to go its own way and supposedly didn’t accept some changes proposed by Ubuntu teams, Canonical went ahead and created its own shell, which suited its needs better.
With Unity, Canonical developed many technologies to improve the user experience such as HUD (inspired by the heads up display). They also introduced a new approach to search through a 'Scopes & Lenses' model. Scopes and Lenses allows developers to integrate different services with Unity so users can access them from within Dash -- a search overlay of Unity.
To improve the user experience with third party apps, Canonical works with projects like Firefox or Thunderbird to integrate those applications with the Unity desktop through plugins.
Unity is a great desktop environment, despite some major flaws -- the biggest of which is the lack of customization of the DE. There is no user-friendly way to change the location of the launcher and panels.
The notification implementation of Unity is downright annoying. Unlike Mac OS X (which probably inspired the idea) or KDE, a user can’t take any action on notifications. The bubble stays there, blocking the view and you can't open the task the notification shows, nor can you close the notification -- quite contrary to the design principles of Unity. What’s even worse is that there is no way, that I know of, to disable notifications.
Add to that auto-hiding menus and a lack of official support by any major distributions, and Unity becomes extremely counter productive.
New technologies like HUD
Poor implementation of notifications
Very little customization
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