MG Siegler of TechCrunch says that not only is Amazon really building a tablet, he's tried it out and he loves it. The story goes that Amazon will release a 7-inch screen version this fall and then a 10-inch in the new year. The devices will run on Android but this isn't some kind of Google partnership deal, Android will function as more a back end operating system and the whole experience will feel different from standard Android fare. The most amazing part, and again this is all TechCrunch's claim, is that the 7-inch will retail for $250. That's not only $50 cheaper than the lowest previous estimate but is exactly half the price of the cheapest iPad. The Whole Internet is now predicting that this will be a screaming big seller and the first big alternative to the iPad.
As I've said before, Amazon will lose money selling these things but they will make money with what they're able to sell for them. A grocery store doesn't make money buying shopping carts or building parking lots but those things enable more purchases.