299$ comes pretty close to mass-market appeal for something that has a Blu-ray player built in it...

My guess is they A) Can't afford to lose this generation, so this is a rather ballsy all-out price war on MS's 360 and even the Wii to a large extent.  They are taking a huge hit hoping to recoop costs later with game sales and Blu-ray sales. 

With a desperation move like this, it leads me to believe that Sony is in trouble.  If this doesn't significantly shift momentum to their side (at least over 360) then they may pull the plug on PS3 altogether.

$299 just two months after the 40GB model starts off selling for $399. I think this maybe Sony's last gasp. Once they do this they are stuck at the $299 price tag for a while. It may help in the short term but not in the long term. In the long term, price drops are coming for the 360 and the Wii. As hot as the Wii still is if it drops to $199 I can't imagine how constrained the supply will be.

 Unless the customers are making a coup against blu-Ray.  Don't underestimate the power of the consumer to resist an unneccesary format change.  But I was really hoping leo-J would clarify exactly what is at an end.  Just to get it on the books.  Even Nostradamus needed a scribe.

If this happens...umm I just dunno what will happeen

SONY NEED GT 5 or FF13 NOW TO PERMANENTLY BOOS SALES!!

You guys are setting yourselves for a disappointment with so much excitement... Look at the last few posts I made in this thread:

http://vgchartz.com/forum/thread.php?start=150&id=15073

it is why a price cut WITHOUT BIG Game is stupid

at least, when they introduced the 40gb, we were near Xmas and the PS3 was in bad momentum (NA sales low, Xbox360 PAL sales high du to price cut+halo) :
it ws needed

I'll rather buy spraypaint and color it Half-Life orange!

 Why would people buy Hd-dvd en-mass if Blu-ray has the most shelf space and the most movies coming out for it?...

And, don't get to that 'Dvd is the true winner' point... That's just bullshit, just wait 2 years and you'll see that most likely Blu-ray has reached mass-market penetration. That's just a given because people want  to move forward and not stay with one format. Same with LP's - CD's or VHS - DVD's... It takes a while but eventually it WILL happen. And the one with the most support wins. (Blu-ray this time)...

This will directly compete with the 360 for sure.
if this is also going to europe, then the ps3's lead will grow further over the 360.
i can't really predict how it will compete against Wii though.