First up, I agree with Peter that a tablet from Amazon is inevitable. I've written about this before and colleague Jason Perlow has too. The company has been carefully building up a retail ecosystem on the Android platform, and the recent opening of the Amazon Appstore was the final piece of the pre-tablet puzzle. The system is so well fleshed out that Amazon would be remiss in not producing its own tablet.
A lot of the reaction to Peter's article deals with the notion that Amazon would upset its OEM partners in the Android space if it released a competing tablet. That makes sense to a degree, but I don't think that would be a factor. I don't see Amazon's tablet as a product going after the Android tablet market at all. I believe it would be intended to extend the company's retail operation into the next logical space. I firmly believe that Amazon's intent would not be to produce a state-of-the-art mobile device that will set other tablet makers back on its heels. Its tablet would rather be designed to have the Amazon retail system completely ingrained into a decent, economical tablet. Think of it as an extension of the Kindle ereader.
It will be a full Android tablet, don't misunderstand me, but its primary purpose will be to sell you Amazon products, and then provide a nice mobile method to consume those products. A Kindle on steroids, if you will. It won't be designed to just sell you digital products for the tablet, oh no. Amazon will integrate it into the entire retail operation, which will make it possible to sell the tablet for a ridiculously low price.
I envision constant promotions aimed at Amazon tablet owners. Free shipping for any product bought from the tablet or big discounts for similar purchases. Amazon is a master at playing the retail game, and this will fit perfectly into that. Amazon doesn't want to sell you a tablet, they want the tablet to sell you lots of other stuff.