The Amazon marketing campaign for the Kindle Fire pegs it squarely as a Kindle that does other stuff too. The $199 price puts it firmly in the ereader camp, more so than the tablet market, as tablets are still as a rule much more expensive.
The special user interface that Amazon has used to hide the Android base from buyers further places the Kindle Fire in the augmented ereader category in the minds of most prospective buyers. I believe it is a fair statement that most mainstream consumers buying the Kindle Fire are picking it up not as a tablet, rather an ereader that does other stuff too.
This may be a subtle difference, but it is important to understand as the Kindle Fire is likely not really competing with other tablets. It makes sense to track shipments and sales of the Fire with other tablets, as it may end up inadvertently competing with them, but that may not be accurate. Many Kindle Fire buyers will pick it up to read ebooks, and then graduate into more heavy tablet-type usage because it can do so.
See also: Forget the iPad: Android tablet makers better fear the Kindle Fire
I don't think Apple is concerned about competition from the Kindle Fire, and rightly so. I see a vastly different market segment buying the Fire as opposed to the iPad. Android tablet makers are a different matter, as the cheap Kindle Fire may end up grabbling customers that would eventually have picked up a competing tablet as prices drop.
The Kindle Fire is definitely blurring the line between the ereader and tablet markets. I suspect this is exactly what Amazon intended, and it is no doubt quite pleased with the way things are going with the Fire.