I just have to wonder ... was this designed to solve some problem (what?) or just to make money for Apple? It sits right in between two useful things - a laptop and a phone - but I don't see any practical use for it.
It's an information appliance, a device for consuming content, aimed at people who don't really need to author new content and who don't need or want "a computer". Think of it as a portable TV - TV in the sense of a universal display device. eBooks, videos, maps, web-surfing, games, You-Tube, photos, that kind of thing. It runs iPhone apps so it's really very versatile.
It's simplicity is part of its virtue. Not having multi-tasking is a feature, not a bug, for the intended market. Likewise many of the other restrictions. Some of the other restrictions are due to it being version 1; like the early iPhones were restricted, and it's taken a few iterations to get to the power it has today.
Even today it delivers a compelling user experience. A lot of the anti-Apple crowd underestimate the importance of that kind of design. It's not just cosmetic.
It's more like an iPhone than a netbook. From that perspective, the problem it solves is the iPhone's tiny screen. Until we get fold-out screens, any pocket device will be too small for really comfortable browser, reading, video-watching etc. It's not for everyone, and if you use a keyboard a lot then a netbook will be fine for you. However, there are a lot of people who don't need a netbook but do want a better screen than a smart phone.
Back in the '70s we thought by now we'd all be living on the moon and have personal jet-packs. We also thought we'd have tablets like the iPad. Apple are building (or aiming to build) the kind of information appliance you see casually used in SF shows like Avatar or Star Trek.