Well let's face it, It sells well in part because of limited supply. You see one in stock you're amazed, and it's cheap enough to impulse buy. You get it before someone else does, then consider yourself lucky. Or your kid was very upset last year you couldn't find one, so you see it and grab it before it's gone. I believe It's highly unlikely they would have sold so many if they had more in stock. The low availability also raises consumer satisfaction as those who get it think they have something special.
The other reason is the price of PS3, that factor alone leaves the wii in a class of it's own. If PS3 was $250 right now wii would be in a tough spot. Yea the 360 is $200, but the xbox brand really hasn't established itself to the casual market before- online fees is a major deterrent to casual players.
