This morning, Amazon announced the Android-based, color, Kindle Fire for $199, and two e-ink, black and white readers for $79 and $99 respectively, the "Kindle" and "Kindle Touch". Most of the press so far has been focused on the Kindle Fire and it's potential as an iPad competitor. That seems a little misdirected to me, given that it's coming out at about 40% of the price point of the iPad, but I guess it makes for better headlines.
There's a large percentage of Americans that are not heavy book readers (occasional at best) but are heavy consumers of other media - particularly video and music. I think the Kindle Fire is targeted at them, while Amazon has been smart enough to continue advancing the book-focused Kindle line.
(Will Apple come out with a competing device between now and Christmas? Maybe, but I doubt it. I think they're more interested in improving the iPad's dominance at the $500-$1000 price range than undercutting their own product with a $200-$300 unit. But I could be wrong.)
I pre-ordered a Kindle Fire this morning (they're expected to ship mid-November) - I'm already both a heavy Kindle user, and a heavy Amazon Video On Demand user. Plus, as an Amazon Prime subscriber I have free access to thousands of videos. It seems like a great device to have in my bag for my commute to work, or waiting on my next flight, and I'm looking forward to testing it out.