I'm hoping this $500 iMac that is incredibly small according to Think Secret is really happening. As I see it, we've got a dedicated media computer for some - especially the Windows user who feels he needs to keep his PC. The media iMac being so small, will fit on the desk somewhere next to the iPod. The software running will be iLife - the perfect media computer software. The parallel universe to Microsoft's business-oriented Office suite. Steve has said he is targeting the consumer market (quite some time ago now) and a cheap iMac certainly helps with this.
Its size benefits will include the ability to stand the Mac on its side or put it below a display or monitor. - Think SecretOr, the *media* iMac is the third entry into the Macintosh home entertainment center with the iPod being first and the Airport Express being second. We need a computer in our home entertainment centers these days because we want to control our music and digital video recording and playback and who knows what all. A tiny iMac that can use the TV as its display device seems perfect for this task (there's no mention of an RGB out but perhaps an adapter would do this).
And, don't forget AppleInsider's rumor that Apple is coming out with its own brand of powered iPod speakers. This is no accident. Apple is moving into the consumer space and with iPods selling like hot-cakes, now is the time to extend its brand. Up till now, Apple has been satisfied selling third-party consumer items like cameras and iPod speakers. Apple used to sell a camera and I think they should go back to that with all sorts of iPhoto and iPod synching features perhaps or I guess they could add the camera to a real photo iPod.
OK. Back to the real world now.