Nintendo made a very shrewd move. They saw Sony and Mircosoft were both targeting the hardcore gamer and looking to expand out. So they targeted the casual and looked to expand in, providing a system that's different enough that we'll (and I mean people hanging on this site) will probably all end up buying both a Wii and either a 360 or PS3. More casual gamers will be happy with just the Wii. So in a way, they were true in that they were not looking to compete --- head-on.
But by nabbing up the mass market, they've left the competition in a desperate fight for the small (and expense to produce for!!) hardcore crowd. No matter where the Wii ends up this generation, 1st, 2nd or 3rd, they'll still make MEGA-bucks more than either Sony or... well M$ will never reach profitability really, their too far in the hole.
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