That is only partially true. It is also a support product, giving you two years of additional access to Apple Support. They often will support you with related products, such as Time Capsules and Airport Extremes. They assist with software issues not even related to hardware failures.
A single incident call costs something like $29. Dell charges $39, VMWare $29.99, Parallels $19.95. This is just the cost for diagnosis; parts and labor are extra. You cover the $169 cost with just 6 calls to Apple support over a 2 year period.
Checking my very incomplete records I placed at least 10 calls to Apple support over the supported lifetime of my MacPro for issues which ended up with senior advisors or development. So I saved at least $121 by having AppleCare, despite the fact that I had no hardware failures. Guestimating that I spent 50 hours on the phone with them, that's $3.38 an hour. The $169 (or whatever I paid) did not come even close to Apple's costs by an order of magnitude.
For me AppleCare is extremely cost effective; an incredible bargain.
though risk when it comes to mobile phones, the risks associated with motor vechiles do not apply, there is profiting too, especially on the X.