Actually... yeah. It is one of Amazon's best selling, if not THE best selling product.
The Kindle App isn't great for reading on LED screens. Once you experience e-ink and read for 2+ hours or in sunlight then you'll understand. Plus battery life that is measured in weeks and not hours is pretty darn great as well as free wireless integration.
Well, you're wrong. You're making assumptions on everyone being like you. I myself own a Kindle 3 and a massive library of Kindle books, and since getting the iPad I've not once picked up the Kindle. I read all day and all night on the thing (I read a ton of books as it's my main "hobby") and I never get eye strain. Never. Not once. I can read in bed at night with all the lights off (including that little Kindle LED light attached to my Kindle's case) with my iPad and the text reversed out in the Kindle app. The eye strain argument is just a myth. I've watched TV in a dark room for 40 years and never got eyestrain. I'm typing this right now in a dark room on a LED monitor on my Mac and don't have any eyestrain.
Not to mention using the dictionary on the Kindle app on the iPad is infinitely easier do to just touching on a word and BAM the definition comes up...unlike having to cursor down down down....over over over...to the word then look it up in the dictionary as you would on the hardware Kindle.
NOW, having said this. Amazon is probably the company that can actually have a challenger against the iPad with a new Kindle touch screen and the entire Amazon infrastructure to back it up. What I'd like to see is have a dual-layer type Kindle. One with a nice color screen running a hybrid Android OS that Amazon controls and updates and on TOP of that an e-ink screen that transparent most of the time unless you're reading a book. And all of it touch-screen. Not sure the technology is available for something like that yet, but I'd be interested in something similar.