The first question that popped in my mind as I read this was: how will this affect Apple over time? If tablets with decent specs are available in China at relatively low volumes for $35 each, it's a matter of time before we start seeing free and nearly-free tablets in developed countries like the US. (Not just Amazon; companies like Verizon and Comcast could throw in a free 7" Android tablet just for signing up with…
If the market follows the iPod model then consumers on a whole will prefer the Apple models over the "cheap" alternatives. This will continue until the market is superseded by another market. If the market follows the PC model then Apple's share will collapse to a modest percentage, but will still control the profit share. In either case Apple wins.
There is a third option of course; that the market follows neither model that have gone before, and Apple does not win this time. We won't know for sure until after, though.
* Disclosure: I work at Google, so my opinion is not without potential bias.