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The Wii is a video game console, just like the 360 and PS3.  Of course they're competing in the same market.

As far as system power goes, I find the Wii to be more than adequate.  It's still more powerful than any other console ever made except the 360 and PS3.  Play Galaxy, Brawl, or MP3 and you will see what the Wii is capable of.  None of these games could have been done by the original XBox or GC (both of which were more powerful than the PS2).

The Wii is definately targetting more than just the casual and non-gamers; they're going for everybody.