I thought at the time, that Apple would charge between $250-$299 for this device. However, Apple decided to put the base price at $329. At that price, it really does make it a stretch when compared to slightly smaller, and much cheaper ($179 without adds & $199, respectively), devices like the Kindle Fire or Nexus7.
The question is whether the Apple ecosystem and the ability to share apps across devices is worth the higher price. Obviously, if you already paid for tons of premium Apple store apps, you would have more reason to stay with Apple. If the playing field was flat, it would be much harder to justify the added expense.
Other than price, some people will see a benefit in having a smaller, lighter iPad. For me, I find it impossible to justify the device with an iPad 3 and iPhone 4S already in the stable. The question is whether the device is a necessity for someone that owns an iPad? I don't think it is. However, I have large hands and never find the size or weight of the iPad 3 to be a problem. I know some women that say it bothers their forearms if they use the iPad for a long time, so I do believe there are some people that will find the smaller size more comfortable to hold. Also, I struggle with the concept that it is more portable than the iPad for men, but I can see how women could fit it in a purse that would not allow the Original iPad. I don't carry a purse, so it would not be any more portable for how I use it.
While I certainly would be happy to have the lightest device possible, I would rather wait for the 9.7 inch iPad to lose some weight. The fantastic, larger, retina screen are worth the extra effort for me. I find the screen the most important aspect of a tablet. The iPad Mini is not only smaller, but it does not have a retina display. I have an iPhone (which actually does have a retina screen) when I just want to jump on email or the web. I have the iPad for magazines, photos, video, safari and tons of apps that are simply better on the larger display.
Anyway, I think the iPad Mini had to be made and I think it will be popular. The price may move some people to the Nexus 7 or Kindle Fire, but I think many people that have had an iPhone for any length of time will find the extra $130 worth the money, assuming they bought more than a few apps. The question is whether we need a smaller iPad? I think demand shows that we did. I just don't have a personal demand for one at this point.