I think it's a good move, you have to realize that retail will be about $99 and from what i've read, some carriers will be giving them away as promotional items. Sprint for one said that they will be giving them away with signing a new contract.
I think it will be a great phone for large families with teenage kids (or younger). Instead of dropping $200+ on an iphone ($200 promotional price, way more retail if you aren't in contract), a family can buy their kid a $99 phone.
I am however disappointing in the lack of innovation i'm seeing at apple.