A few points:
The "three tiers" as far as I know are as follows:
In the first, Nintendo was aiming at gamers who were burnt out on current offerings. They were aiming at lapsed gamers and stopping gamer drift; basically customers who were approaching the fringe of the industry. How did Wii have a massive launch after GC's failure? You cannot reach soccer moms or grandmas on day 1; Wii hype and early sales came from gamers who were being overshot by the other systems, including people who had come into the low end fringe of the market in browser or mobile games.
In the second tier, which Malstrom mentioned Wii Fit is the start of, what's the buzz word? "Oprah." People who watch Oprah are no longer fringe customers; they have previously refused to play games entirely. As some have pointed out, there have been fitness games in the past, so these customers were not ignored by the old market entirely. But the values of the old fitness games were still the values of the old market, and these customers found those values unacceptable.
In the third tier, Nintendo will start messing with other markets. They'll be making games in areas that were basically considered the domain of other industries; customers the old market didn't even acknowlegde existed. I'm not sure how Nintendo will do this, but for one, its easy to see how Nintendo could build from Wii Fit to compete more seriously with the fitness establishment.
I deduced this from a minimum of research instead of sitting on my hands waiting for Sean Malstrom to explain theories he didn't invent!
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"[Our former customers] are unable to find software which they WANT to play."
"The way to solve this problem lies in how to communicate what kind of games [they CAN play]."
Satoru Iwata, Nintendo President. Only slightly paraphrased.
