It's a portable multi-function device. It can be your navigation system, your cookbook, your sheet music book, your digital photo frame, your digital art canvas, your book reader, your music player, your video viewer, and anything else you need. The iPad isn't for editing video and playing Crysis -- it's for general use, especially in situations where it works better than a standard computer.
Ever heard of the
iPod Touch? It's a wonderful portable multi-purpose device that happens to run the iPhone OS. My iPod Touch is my portable web browser, portable music player, portable Youtube player, portable movie player, portable location finder and navigator, portable photo viewer, portable gaming device, portable multi-touch synthesizer, portable restaurant location and information device, portable social networking device, portable personal organizer, portable time killer, portable weather updates device, portable alarm clock, portable timer, and favorite portable device. These are the things *I* use my iPod Touch for daily. It can be so much more than that. There are over 140,000 applications in the App Store. I have no regrets buying this device.
What did you expect them to do, slap an operating system not designed for touch screen devices onto a touch screen device and call it a day? There are quite a few devices like that with Windows on it, if you want to get one. See how well they work.
The reason they're using a modified version of iPhone OS, and not a full blown OS like OS X is because it's brilliantly designed for multi-touch. and it works great for their targeted audience. It isn't supposed to be a full computer-- it's supposed to be in between a computer and a smart phone.
Someone I know made an excellent summary of its two target audiences. This is my summary of his summary with my own take thrown in:
1) It's for 99% of computer users. These are the users who only need the basics like web browsing, emails, photos, videos, and any other basic things. The iPad could replace whatever computer they have, because it does these things better.
Netbooks do these things, but they don't do them well. You can't walk around and use them, and they're, quite frankly, too much for doing these basic tasks. You need to stop thinking that you need a full OS and a keyboard to do these things.
2) It's for people who want a larger and better iPod Touch. Great apps, great interface, many uses, on the go.
On top if everything, I don't see how it's a device with just "minimal features". The app store has over 140,000 existing iPhone/iPod Touch apps, and there will be, without a doubt, a ton of great apps for the iPad. It's not trying to replace the netbook, and I don't even see what netbooks can really do that the iPad won't be able to. I can tell you what things the iPad does better, though.