This is good for several reasons...
1) Macs of the fairly immediate future, I believe) won't even have a DVD drive (like the MBA)...
I think this is a preempt to no drives in the mac. It's hard to justify having physical media when your computer doesn't have the drive to play/use it. They talk of retail space but I think that's just a side benefit.
2) Get people to upgrade to Snow Leopard or Lion
Also, as been said here, this is a sure way to get people to upgrade to Snow Leopard. I would imagine that Apple will have a way to help customers who have slow connections in getting the OSX update plus the software they'd like to buy (burn to a DVD for them to take home.)
There's too many people still running Tiger and/or Leopard. I think that with every major OS revision that is sold, Apple needs to give them more and more incentive to move forward (whether it's features that's positive or limitations that are negative). People need more and more reasons to get up-to-date. And this isn't about the $29-$129 either, I don't believe. I think it's about the customer having the smoothest experience on the platform possible. This is just one more way to help that along.
Recently, I ran into a Leopard user and I asked her did she know about the Mac App store that just opened that day. She didn't, but I also found out that she was still running some version of 10.5. I explained that the $29 was well worth the upgrade and that she should do it. She was excited to find out about the cheap upgrade and the possibility of lots of great paid and Free apps that were just around the corner for her. Generally, it's not about the money. It's just people need to be educated about what's available.
3) Save money on Shipping to Apple warehouse and then to their stores
No brainer. Lots of money is spent way before a box of software is sold.
4) Save valuable retail space for bigger money makers
Again... a no brainer. Except for a few software suites, most of the space that software boxes take up is eating up space for hardware that could be sold for a lot more money.
5) Fights piracy
With the software being tied to your itunes account, this is one sure way of fighting piracy of software. Pirates don't like this, but if you're for it, don't bother with trying to being pissed at this point.
6) Buy one/run everywhere
Much better than before when your apps could only be used on 1-2 computers. This is great.
7) Never lose software again
With the software tied to you account, you can always re-download and install even if you've lost your computer. No serials, no hassle... just download and install -- free and easy.
Of course, the smart thing to do is to have it backed up to begin with, then all you need is to authorize the new computer you get by logging into your iTunes account. Back-ups, people, back-ups!
As a person with awful internet, I'll say this. My internet is terrible and capped satellite Internet (350MB limit over 4hours). But I have found options. I go into my town (pop. 5000) and go to my coffeeshop and dowload 1GB OS X updaters all the time with their free Wi-Fi. Mac users can find a way. Even us with terrible service. Many satellite services that cap users have at least one time during the day that's off-peak and you can use all you want. Is it convenient for me to have to get up at 2am-5am to download software but people in rural areas have to do what they can. I am used to this fact. I'm not happy about it, but it's another way for me to get what I need.
Also I'm sure Apple.com will still sale the physical software for a time.
There's too many benefits to this to not do it. People complaining about lack of Wi-Fi need to look around. Even most McDs have free wifi these days.
Store -- just to download new software...
