Less conceptually fragile, less expensive, more portable, same software stack, same media stack, same OS, same UX, same premium experience, same monstrous manufacturing and distribution reach, same monstrous advertising and product awareness engine.
Every single one of the children you see in restaurants working an iPad so mommy and daddy can eat in peace will have one of these by January.
Schools will buy in by the hundreds of thousands, regardless of actual utility or how successful digital textbooks eventually become.
This is the new travel iPad. This is the status gift for the developing world. This is the throwaway iPad if you're rich or the first one you look at if you're less so.
It's priced to make Apple the margins they want while still inviting comparisons with less expensive and similarly sized tablets. It's going to suck the oxygen out of the $300-$500 price range for anything with a screen.
And it's cheap enough to substantially distinguish itself from the main iPad line, which is selling millions a week. That's all it had to do, pricing-wise.
I don't want or need this, and I don't think it was particularly necessary for the health of the iPad line, but they dotted all the Is and crossed all the Ts when designing this product.