The regular rear-wheel-drive Escalade gets an EPA rating of 12 mpg in the city and 19 mpg on the highway. Compare this to the hybrid version which gets an EPA estimated 20 mpg in the city and 21 mpg on the highway. Say what you will about the notion of a hybrid Escalade, it's difficult to argue with the significance of its fuel economy improvement figures. For reference, a 2008 Toyota Camry with a V6 engine (and roughly 2,400 lbs. less mass than the Escalade Hybrid) gets an EPA rating of 19 mpg in the city.
Superficially, the Escalade Hybrid is almost identical to the regular Escalade. Mechanically they are two very different beasts. At the heart of the Escalade Hybrid is General Motors' two-mode hybrid system. When you are driving at low speeds through the parking lot at Barney's, "mode one" allows the Escalade to operate on battery alone with the engine shut off (releasing zero emissions). When you are towing your Chris-Craft to the lake house, "mode two" allows for a combination of battery and engine at the same time, which achieves greater fuel efficiency than if the engine was running unassisted. The hybrid system also allows the engine to shut off altogether when the vehicle is stopped at a light or just sitting in traffic. Wave at the girl in the Range Rover next to you: She's burning gas, you aren't.
In addition to the hybrid system, Cadillac has engineered the Escalade Hybrid's 6.0-liter V-8 engine with a technology called Active Fuel Management. This allows the engine to deactivate cylinders when they aren't needed, so if you're on the highway and you lift your foot off the gas pedal, the vehicle might only use four cylinders instead of eight, which contributes to higher fuel economy. Think of it as a system that allows the Escalade's engine to temporarily transform from hauling machine to Honda Civic without you ever noticing…except when you spend more time between fill-ups.
Finally, the vehicle uses regenerative braking to convert energy into electricity when the brakes are applied or the vehicle is coasting, like a squirrel burying acorns to consume at a later date. This electricity is stored in the battery for use when the vehicle starts moving again. In total, the hybrid battery system adds roughly 400-lbs of mass over the base Escalade, yet it hardly intrudes at all into the vehicle's cabin.