The central star in CRL2688 was a red giant a few hundred years ago. The nebula is really a large cloud of dust and gas ejected by the star, expanding at a speed of 20 km/s (115,000 mph). A dense cocoon of dust (the dark band in the image center) enshrouds the star and hides it from our view. Starlight escapes more easily in directions where the cocoon is thinner, and is reflected towards us by dust particles in the cloud, giving it its overall appearance.
Objects like CRL2688 are rare because they are in an evolutionary phase which lasts for a very short time (~1,000 to 2,000 years). However, they may hold the key to our understanding of how red giant stars transform themselves into planetary nebulae. For the first time, we can see a 10,000 year-old history of mass-ejection in a red giant star in such exquisite detail. The arcs in CRL2688 represent dense shells of matter within a smooth cloud, and show that the rate of mass ejection from the central star has varied on time scales of ~100 to 500 years throughout its mass-loss history. With Hubble we have detected matter in this nebula to a radius of 0.6 light-years -- much further out than has been possible before, giving a better estimate of the amount of matter in the nebula.
Both the above scenarios require the ejection of high-speed material in a narrow beam. The presence of such material in CRL2688 has been inferred from other observations. However, the mechanism for ejecting high-speed jets or for producing the cocoon are not understood. But it seems likely that if the central star in such objects has a faint companion star, the gravitational interaction between the two stars and/or the outflowing matter from the red giant star may play an important role in the production of the cocoon and the jets.