Well...that's because a Kindle (the old ones) is/was an ereader and an iPad is a tablet. The color Nook is probably the closest competitor to the Fire,not the iPad, and at $50 cheaper than the Nook, it'll undercut a lot of those holiday sales.
No, it doesn't have 3G. Yes, you need to be wi-fi connected to use the Cloud service (not a big problem for me; usually I just want to read), but the Fire is not a replacement for a computer, it's a step up from an ereader, a mini-tablet if you will. It's a multimedia entertainment device that you can check your email and surf the web with. I can access my Netflix account from it and stream movies, or I can get movies from the Amazon store and stream them - which is just cool.
I don't have the $700 for an iPad, and frankly I think Apple is overhyped. But it words for some, so have at it. I think I'll like having it when I'm stuck in a doctor's office, or my kid is bugging me and wants to play Angry Birds. I KNOW I'll like showing it to my students and seeing their eyes light up when I bring up a full color children's book.
It'll work for me, I think. My son's getting my old Kindle, just as soon as I figure out how to get the naughty books off of it.