If you go back in these forums 4 years ago, there were similar apprehensions expressed about the then rumored smaller iPad. You are now here to see how that worked out.
They are just adding a new product to their line. I cannot see how it will destroy the ipad mini.. Unless ofcourse there are a finite amount of people interested, and those buyers have more options- they might shift between ipad mini and this new thing, but Apple is still getting the money.
Someone was concerned that there would not be enough of a differentiation between a large iPhone and an iPad Mini. I suggested that Apple could add something to the iPad Mini, like an active digitizer w/pen support that would make the Mini stand out.