I think the big winner here will be the major Android tablet makers.
HP is out of the tablet market and RIM is on the way out -- the Fire is manufactured by Quanta, who built the PlayBook for RIM, and has much the same form factor. Obviously, this is a good way for them to unload their stock of components and avoid a big loss.
Amazon forked the Android 2 source and the Fire is a customized Android device with much of the functionality (camera, Bluetooth, etc.) left out. The Fire is designed to work only as a device to consume Amazon's media services - books, music and video. That will certainly satisfy the needs of many entry level customers, but anyone who wants more will want a full Android tablet, particularly if these become available at competitive prices.
Several months ago, Lenovo announced that it would be shipping a full-featured 7 " Android tablet by year end, the A1, also priced at $199, and with the same screen resolution as the Fire. If Lenovo can do it, so can Samsung, Toshiba, Motorola and others.