It will run the iPhone OS but you can not make phone calls with it (well at least not on GSM infrastructure

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They might have app compatibility between the two devices in mind.
There will be iPads with 3G support, it is probably for only internet connectivity. Obviously they want everyone to have an iPad accompanying their iPhones which is not unlikely.
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Taking into account the limited functionality and restraints on the device, people who got used to a PC (like me) won't prefer to buy one. But if it can gain enough momentum and popularity, major players might give it a shot and we might end up with a device that is better than this.
This is definitely not a laptop with a twisted monitor then called a tablet, this is immensely light and portable. While a laptop seems mobile, it is not and this device will redefine mobility.
A truly lightweight device equipped with wireless connectivity and necessary processing and storage power, plus wireless recharge-ability is what I am waiting for. Then we will be able to do more in our daily lives.