Gruber has a new post addressing the 3 biggest questions: Retina, price vs other products, name.
http://daringfireball.net/2012/10/ipad_questions_and_answers
http://daringfireball.net/2012/10/ipad_questions_and_answers
The thinking behind this question usually goes like this: the iPad (3) has a retina display and the iPhone and iPod Touch have had them for two years, so how can Apple introduce a new device without one? Thats perfectly logical. But consider this: each new iOS mobile device has debuted with a non-retina display, and then gone retina two or three years later.
Another way to look at it is that Apple has to choose its trade-offs. The flagship feature of the iPad (3) is its display. The cost, in terms of trade-offs, is that it is thicker and heavier than the iPad 2 because that big gorgeous bright display requires so much more power. When designing anything, you pick one or two primary attributes and you compromise on everything else.
I expect the primary attributes of the smaller iPad to be thinness, weight, and price. A retina display would make it thicker, heavier, and more expensive. I would love to be proven wrong, for Apple engineering magic to put a 7.85-inch 2048 × 1536 display into this smaller iPad and yet keep it remarkably thin (say, 7.2 mm or so) and light and hit price points under (and perhaps well under) $300. But I think magic is the key word there.
Lastly, debuting with a non-retina display would help differentiate the new smaller iPad from the regular (and more expensive) iPad (3). Retina displays are premium features; the new smaller iPad is not the premium model in the lineup. You dont want to buy one because it doesnt have a retina display? OK, buy the regular iPad (3) that does.
The thinking behind this question seems to be something like this: bigger is better, smaller is cheaper, so if the new iPod Touch costs $299 then the smaller iPad has to cost $349 or more because otherwise, if this new smaller iPad cost less than the new Touches, everyone whos thinking about buying an iPod Touch is going to buy one of these iPads instead because its got a bigger display and costs less.
I see several things wrong with that line of thinking. Its true that smaller generally implies cheaper, but miniature carries a premium.1 The 13-inch MacBook Pro is smaller than the 15, and thus cheaper. The 11-inch MacBook Air is smaller than the 13, and thus cheaper. But the iPod Touch isnt just smaller than the iPad its miniature. Gadget prices tend to follow a U-shaped curve: big is expensive, small is cheap, miniature is expensive. The iPad (3) is near the beginning of the curve. The iPhone and iPod Touch are at the end. This new smaller iPad will be in the middle.
Second is that Apple has no problem if iPod sales, including the Touch, continue to be cannibalized by other iOS devices. If a customer walks into the store and sees a (say) $249 smaller iPad and decides to buy that instead of a $299 iPod Touch simply because its cheaper and bigger at the same time, thats still a win for Apple. The customer just bought an iPad.
On the other hand, if a customer walks into the Apple Store and wants to buy something that will fit in their pants pocket or strap onto their arm while exercising, the iPad isnt even in the picture. Theyre going to buy an iPod Touch or an iPhone; its simply a question of which one.
Dont worry about comparing the price of the new smaller iPad to the iPod Touch. Its a different category. Compare it to the price of competing tablets and to the regular iPad. Thats all that matters.
You know what other Apple products primary attributes are thinness, weight, and price? The MacBook Air. And, no coincidence, the latest revisions to the Air lineup debuted on stage at WWDC without retina displays. Were a couple of years away from Apple going retina across the board. Thats why my guesses as to what the thing is going to be called go in this order:
iPad Air
iPad
iPad Mini
Mini just doesnt feel like the right way to describe something thats remarkably thinner and lighter but not that much smaller than the regular iPad. But I wouldnt bet against any of those three names.