This isn't about software or hardware specs beyond the broad category of "good enough." Apple's design philosophy has nothing to do with hardware specs and everything to do with overall user experience, and this kind of device takes that approach to its extremes: Apple doesn't intend this as a full-fledged computer or netbook alternative for power users, but as more of a "casual computer" in the same way the wii is a "casual gaming" console (conveniently, "casual computing" includes gaming, which is very profitable).
So you'll never see photoshop on this kind of device, and if you've ever drooled over hardware specs or installed your own graphics card to play Crysis or some bullshit you can probably stay away. The tablet is a smart idea, though. Computers have gotten way too pointlessly complicated for casual use (do I really need all these .dll files, drivers, and registry patches just to surf the internet?) and 90% of computer use is casual (internet, email, basic word processing, light gaming, etc.).
I'd never buy one of these given my current financial situation (I'd spend the $500 on more ram or on an ssd, honestly), but if I had extra cash and travelled more, I'd definitely pick one up.
The google chrome OS offers a similar experience and should also be competitive. Apple has the edge up in terms of form factor (maybe) and certainly in terms of software/hardware integration and elegance. Google has the advantage w/r/t cloud computing, which is where everything is going (soon).