OK, look at the market. On the one hand we have a slew of high end, high spec, high priced tablets sitting on shelves because most of us won't pay $600 for a tablet (Apple geeks excepted). On the other hand, we have the low end, low spec, and low priced Nook Color selling like hot cakes. Did anyone really expect Amazon to follow the so called "leaders" down the drain and come forth with a tablet that no one will buy? Amazon is pretty sharp at marketing.
Besides, for what most will use a tablet for (reading, music, video, simple games, simple internet and email) one does not need high end hardware. What one needs is an ecosystem to make media consumption easy and inexpensive, and Amazon will provide that. Time will tell, but this might finally provide an alternative to the iPad that people will actually buy.