I'm with maddux2005 and batting1000 on this one. It's more affordable and opens Apple up to a bigger market. I'm a student and spending $519 + tax (in Canada) for a new iPad doesn't fit into my budget too well. And I'm totally fine with that because it's a discretionary item that I don't need. But when refurb prices on the iPad 2 were bumped down to $319 + tax in the States, I ordered one and am getting someone to pick it up for me. That's a sale that Apple didn't have before. It may be a slimmer margin but it's obviously working for them or else they wouldn't do it.
Also, Apple plans on getting people into their ecosystem which is something I can't personally put a price tag on, but they can. Get someone hooked on a discounted iPad 2 and maybe they'll upgrade to an iPhone next time their contract expires if they haven't already. They'll buy apps, love the device, etc. and get hooked on Apple products. It's worked on me and it'll work on millions of others.
Also, Apple plans on getting people into their ecosystem which is something I can't personally put a price tag on, but they can. Get someone hooked on a discounted iPad 2 and maybe they'll upgrade to an iPhone next time their contract expires if they haven't already. They'll buy apps, love the device, etc. and get hooked on Apple products. It's worked on me and it'll work on millions of others.