Apple is planning to use a significantly shrunk bezel, for that matter, in order to keep things compact, yet provide ample screen real estate. The iPad mini, or whatever it gets called eventually, if all of this holds water, is expected to range in price from $249-$299, depending on the configuration.
Such a munchkin iPad could definitely give affordable Android tablets a run for their money, and expand the tablet iOS applications universe significantly, due to exponential increase in the target market base. All good news for iPad owners.
For a more in-depth analysis on the pros and cons of a smaller, 7.85" iPad for Apple, you can read our dedicated article here.