A lot of people just want a cheap tablet and Android is going to step up and fill the void. These would have slower hardware and older software but most people won't worry much over it (looking aback t PC vs Mac era).
Also regarding the price of Android tablets, none of them seem to be able to challenge Apple's $499 price point. I'd love to be proven wrong but it seems like for whatever reason—likely their ability to get extremely cheap components—Apple will be ahead for a while yet.
On the iPad level, Samsung's coming in hard with equal pricing ($499 16gb/wifi) and at-least-as sexy hardware. I think they're likely willing to take a hit on profit to get market share.