John Gruber provides a well-reasoned (math included) argument about the purported iPad mini:
Cost can’t be the only factor in play, though. There must be something great about the device’s design. If it’s not display quality, what else? I’m thinking thickness and weight. The iPad 3 gained a retina display — but at the expense of getting thicker and heavier than the iPad 2, so as to fit a more powerful battery to run those additional 2,359,296 pixels. So I’m thinking the iPad Mini doesn’t get a retina display but in exchange gets to go remarkably thin.
How thin? Possibly as thin as an iPod touch. How heavy? Potentially 60% less than a WiFi-only iPad 3 and 22% less than a Nexus 7. To top it off, what if the name was iPad Air? Sign me up.