Three months ago, online retailing giant Amazon didn't even sell a tablet computer, but today the firm controls a stunning 40 percent of the market for Android-based tablets, according to one market analyst. But whichever numbers you choose to believe, one thing is certain: With its lowball pricing, Amazon is sure to capture serious market share in this nascent market with its Kindle Fire device. And that's bad news for high-priced luxury items like Apple's iPad.

Amazon doesn't release Kindle unit sales figures, preferring instead to focus on vague proclamations. That said, this past holiday selling period was the best ever for the Kindle device lineup in general and for the Kindle Fire especially. In its post-holiday sales announcement, Amazon announced that it had sold "millions" of Kindle devices—a figure that includes both the Fire and dedicated ebook readers—and that customers purchased more than 1 million Kindle devices per week throughout December 2011.

Now, analysts are starting to weigh in on actual unit sales. Stifel Nicolaus analyst Jordan Rohan just revised his Kindle Fire sales estimates for last quarter upward from 5 million units to 6 million units—a pretty impressive sales rate given that the device was on sale for only half the quarter. "Kindle Fire has staked out an important market position due to its loyal Amazon customer base and attractive device pricing," he wrote to investors, as reported by CNET.

Meanwhile, Barclays analyst Anthony DiClemente also revised his Kindle Fire unit sales estimate upward, from 4.5 million units to 5.5 million units. And Strategy Analytics says that sales growth of Android tablets outpaced that of the iPad in the fourth quarter of 2011 fairly dramatically, closing the gap between the iPad and its rivals in the Android horde. According to that firm, the iPad controls 58 percent of the tablet market, compared with over 39 percent for Android. Last year, iPad controlled over 68 percent of the market.

In its typical blustery fashion, Apple claims that the Kindle Fire and other low-cost tablets don't actually compete with its iPad, which accounted for more than 15 million units sold in the most recent quarter. That claim is ludicrous, of course, and with Android tablets finally undercutting the iPad pricing structure by wide margins, these devices will cut further and further into the iPad's market share over time. Apple could easily reverse this trend by cutting prices. But it's equally likely the firm will simply claim that low-end Android devices are another type of product and are thus not comparable.

This argument will harm those who try to claim that iPad sales should be counted as PC sales, however. There's a growing movement to do so, given that many iPad customers are replacing (or somewhat replacing) PCs with these smaller, lighter devices. But Android devices have a lot more in common with iPads than do iPads with PCs. This argument is tenuous at best, and while it's true that tablets, PCs, and other devices (including smartphones) are arguably "general-purpose computing devices," they're most certainly not PCs, at least not yet.

As for Amazon, its first Kindle Fire version is woefully inadequate in many ways: It's thick, heavy, doesn't include any cameras, and isn't expandable in any way. That it's already outselling its many Android competitors suggests that pricing is in fact the number-one consideration for purchasing such a device. And those prices aren't just lower—they're much lower. The Kindle Fire costs just $199, far less than the $500 minimum price for an iPad; the average selling price for Apple's tablet is a whopping $715. For that price, you could buy three Kindle Fires and still have over $100 left for purchasing apps and content.

And Amazon, like Apple, is very aggressive about improving its hardware devices, so it's safe to assume that we'll see one or more improved Kindle Fire models this year that will narrow the gap, functionally, while retaining the device's pricing lead. That's bad news for Apple, and it's bad news for other Android device makers, both of which have indeed felt the negative effect of Amazon's entry into this market already.