At pilots to strap to their legs and for doctors to keep in their pockets, apparently. Both of which would be difficult with an iPad traditional.
And at me. It has a better resolution than a phone, is not too big or too heavy to comfortable handhold for any length of time, and it easily fits in most bags.
For me a traditional iPad or bigger only manages the first of those while an iPhone only manages the rest. I find an iPhone is uncomfortable for prolonged reading because of the smaller screen area and the constant scrolling. And a traditional iPad is just too uncomfortable to hold for any length of time, with little benefit from the greater screen size.
Like AppliedMicro, I too use mine on public transport. So size and comfort in the hand and being used in a relatively small space matter a lot.
So who is a 9.7" device aimed at?
The traditional form factor seems more aimed at being used at home or in an office, where it is placed on a desk or in a lap when you sit on a couch. When it was released it was an alternative to netbooks (ask you grandparents) after all. But I have my MacBook to use in those situations.