Apple introduced iPad at the exact same price.
If you recall, all the analysts were predicting *starting* prices from $800 - $1100. The iPad blew those expectations out of the water, and forced several prospective competitors to restart the designs, by starting at $500.
At the time, it was also "unproven." People mocked the name and questioned whether there was a purpose for this kind of device. There were also a very limited amount of iPad-native apps (I do not count pixel-doubled iPhone apps).
There were, at release of the first iPad, more iPad-native apps than there appear to be for Surface. It *also* had access to a thriving ecosystem of apps (those pixel-doubled iPhone apps). The experience through the iPhone apps wasn't anything special, but it could still 'get the job done' while you waited for the the iPad version.
That's a fall-back option the Surface doesn't seem to have.
The entry price for the current model iPad remains $500. The iPad was and continues to be a hit.
No argument there.
The biggest thing MS has to do to get into the game is battle the notion that the only tablet worth buying is the iPad, which seems to be consumer sentiment. Microsoft has begun doing this with some decent-looking commercials as well as touting the Surface-exclusive features such as the admittedly slick cover/keyboard.
I'll admit the keyboard/cover seems like a slick idea. I expect that, if the execution stacks up, we'll see third-party accessories similar to it made for the iPad. That said, execution on the mini keyboards on the market so far has been pretty lacking, so I'm not buying into the hype without seeing it for myself.