Let's start with the bottom line: Amazon's announcements this morning were the most important in the gadget world since Apple announced the iPad on January 27, 2010. With the announcement of a $79 regular Kindle, $99 touch-enabled Kindle, and $199 Kindle Fire tablet, Amazon set itself up for a Christmas clash with Apple's iOS juggernaut. While many tablet contenders have come at Apple, few can throw as many punches as Amazon.
Amazon can hit Apple high with the Kindle Fire, which is the first non-Apple tablet that will offer as integrated a media service as Apple's ecosystem does. And it even comes with a hard-to-believe-but-awesome-if-it-works feature that Apple doesn't have: cloud-enhanced web browsing. The Fire will supposedly offer better mobile browsing because it offloads the computationally intensive bits off to Amazon's cloud computing service.
Amazon can hit Apple low with the $79 Kindle. Because so many gadgets are sold to price-insensitive early adopters, we all tend to underestimate the effect that a sub-$100 price has. The lower the price, the bigger the market. For tablet owners like myself, the new Kindle could be that cheaper device we carry on the subway or to the gym. For people who don't own an e-reading device, a device that is substantially below the $100 barrier may be just the move they need to make the switch to digital reading. HP couldn't move many Touchpads at $400, but at $99 they sold out so quickly that online retailers had to refund people's money because sales outstripped supply. For the mass-market, a double-digit purchase feels more accessible.