I work around "real" people and I've been shocked at how many of them have ordered Kindle Fire's both for themselves and as Christmas presents. These are people who have never owned a tablet and in the case of presents they're buying for other people who have never owned a tablet. When I ask why they're buying them the answer is universally the same thing...
"I could never justify buying an iPad because I don't know what I'd use it for but for $199 I figured what the heck"
A lot of these people are influenced by the original Kindle and its reputation but most are looking for Tablet functionality. When I ask what they plan to use it for the first answer is always "browse the web"
I do agree its a different market from the iPad. But the question I have is whether these people will go for a higher end purchase further down the line. And if so what they'll buy. Because these people will be tied to Amazon by their media in the same way I'm tied to Apple.