By now, everyone is tired of hearing about the iPad, but the negative responses are so perfectly misguided that it would be wrong to waste this opportunity. Even better, we can look back at the 2001 iPod launch and see the exact same mistakes. But this isn't about the iPad or the iPod -- it's about product design.
The most famous iPod review was from Slashdot, which simply declared, "No wireless. Less space than a nomad. Lame." The iPad reviews are similar in that they focus on the "missing" features. Those missing features are typically available in a variety of unsuccessful competing products, which leads people to erroneously conclude that a successful product would necessarily have even more features!
I believe this "more features = better" mindset is at the root of the misjudgment, and is also the reason why so many otherwise smart people are bad at product design (e.g. most open source projects). If a MacBook with OSX and no keyboard were really the right product, then Microsoft would have already succeeded with their tablet computer years ago. Copying the mistakes of a failed product isn't a great formula for success.
What's the right approach to new products? Pick three key attributes or features, get those things very, very right, and then forget about everything else. Those three attributes define the fundamental essence and value of the product -- the rest is noise. For example, the original iPod was: 1) small enough to fit in your pocket, 2) had enough storage to hold many hours of music and 3) easy to sync with your Mac (most hardware companies can't make software, so I bet the others got this wrong). That's it -- no wireless, no ability to edit playlists on the device, no support for Ogg -- nothing but the essentials, well executed.
We took a similar approach when launching Gmail. It was fast, stored all of your email (back when 4MB quotas were the norm), and had an innovative interface based on conversations and search. The secondary and tertiary features were minimal or absent. There was no "rich text" composer. The original address book was implemented in two days and did almost nothing (the engineer doing the work originally wanted to spend five days on it, but I talked him down to two since I never use that feature anyway). Of course those other features can be added or improved later on (and Gmail has certainly improved a lot since launch), but if the basic product isn't compelling, adding more features won't save it.
By focusing on only a few core features in the first version, you are forced to find the true essence and value of the product. If your product needs "everything" in order to be good, then it's probably not very innovative (though it might be a nice upgrade to an existing product). Put another way, if your product is great, it doesn't need to be good.
So where does this leave the iPad, with it's lack of process managers, file managers, window managers, and all the other "missing" junk? I'm not sure, but one thing I've noticed is that I spend more time browsing the web from my iPhone than from my laptop. I'm not entirely sure why, but part of it is the simplicity. My iPhone is ready to use in under 1/2 second, while my laptop always takes at least a few seconds to wake up, and then there's a bunch of stuff going on that distracts me. The iPhone is a simple appliance that I use without a second thought, but my laptop feels like a complex machine that causes me to pause and consider if it's worth the effort right now. The downside of the iPhone is that it's small and slow (though the smallness is certainly a feature as well). That alone guarantees that I'll buy one to leave sitting next to the couch, but I'm kind of atypical.
Ultimately, the real value of this device will be in the new things that people do once they have a fast, simple, and sharable internet window sitting around. At home we'll casually browse the web, share photos (in person), and play board games (Bret's idea -- very compelling). At the office, maybe we'll finally have an easy way of chatting with remote people while discussing a presentation or document (e.g. audio iChat with a shared display). Of course these things are theoretically possible with laptops, but it always ends up being so clumsy and complicated that we don't bother (or give up after trying once).
Making the iPad successful is Apple's problem though, not yours. If you're creating a new product, what are the three (or fewer) key features that will make it so great that you can cut or half-ass everything else? Are you focusing at least 80% of your effort on getting those three things right?
Disclaimer: This advice probably only applies to consumer products (ones where the purchaser is also the user -- this includes some business products). For markets that have purchasing processes with long lists of feature requirements, you should probably just crank out as many features as possible and not waste time on simplicity or usability.