The killer app is for print media, and Apple is getting a cut of subscription and ad revenue which will be used to considerably subsidize the hardware. Google knows this and their moves into OS/browser/phone are defensive.
Apologies for quoting myself, but I finally have time to expound on this.
Apple's tablet will do many things, and it will do many of them surprisingly well. The larger format, greater battery life, and speed boost will, in themselves, be an attractive upgrade for many over an iphone. Gaming will especially be a big draw, but other apps will benefit and I can see the possibility of a new class of apps come to market that otherwise wouldn't work on a small screen or without better graphics hardware.
As for ebooks - yes, it will make Kindle buyers feel a bit foolish, though this won't be Apple's primary push. The tablet will provide a truly rich reading experience that the author/publisher can design, including interactive content. It will make the Kindle look like a 17" b/w TV in an age of 60" LCD HDTV's. It's not that the tablet will be that revolutionary; it's just that it will make people realize how absurdly limited something like the Kindle is. The web experience will likewise be better thanks to the larger format, but also greater speed. There
is a market for "bathroom" browsing, and Apple knows it - they just also know that this isn't a killer feature that by itself will sell hardware.
The
killer app will be geared toward print media. Think iTunes for magazines and newspapers. The print industry is in a world of hurt, and they're desperate for a solution. That's the kind of problem that's really attractive to Jobs & Co. The idea is to have an incredibly rich media viewer which gives the publishers five things - a subscriber model, remarkably inexpensive distribution, artistic control equal to or greater than their print products, interactivity, and a better ad product to sell - ads that can capture the reader's attention far, far better than any banner ad ever could. Make no mistake, this isn't just a new distribution channel for them - Apple is giving them a chance to survive. And a very attractive chance at that. It's an enormous opportunity, and unlike the TV space, Apple should be poised to take control of the market just as they did with music.
What Apple will get in return is a cut of the subscription and ad fees, which will be used to subsidize the purchase price. Those who think this will carry a $1000+ price tag are way off. Apple will set the price according to the market, but I'm suspecting it will be in the $200-$500 range.
So,
if this is true, Apple is looking at the possibility of a huge new revenue stream in the form of ad dollars, which of course paints a big target on Google's money machine. That's why I say Google's moves in the mobile market are defensive - they know where Apple is headed and they're scared.