Ebook readers have extremely high contrast/readability and are extremely energy-efficient, being able to display several thousand pages of material without needing to recharge. eBooks are a narrow product, but they have their own ways in which PMPs cannot compete.
Amazon can do a lot of money only from selling kindle, like Apple does with the iPod.
Hack let you convert encrypted Mobipocket files that were intended for another reader so that that work on Kindle.
The Kindle is already able to read more than just Amazon DRMed content, it can handle a number of formats.