The Kindle 3 is good hardware. Amazon has been refining their ebook for several years and has finally gotten it good enough and cheap enough ($140) to make it a worthwhile purchase.
I prefer the Kindle over a paper book mostly for comfort. I tend to read lying on my side, which makes reading one side of a paper book awkward. The Kindle 3 is also light enough (half a pound) to hold up in the air for long periods. And of course one little Kindle holds lots of paper books.
The big downside to Kindle is you lose your right to resell or give away a book after finishing it. I'm uneasy with this compromise, particularly since Kindle editions are often more expensive than paperbacks. In exchange you get convenience, instant delivery, and a generous variety of free book samples.
One appealing thing about the Kindle is it's more than just a viewer for Amazon ebooks. It can display pretty much any electronic document thanks to Calibre, third party conversion software. Calibre also has an interesting RSS-to-ebook option that you can use to automatically prepare a daily newspaper or magazine, although so far I've found Amazon sells subscriptions with better formatting for the periodicals I care about. Kindle's ability to display PDF natively is handy too; Ken uses the larger Kindle DX for airplane charts.
A key thing about the Kindle is it's not a computer, it's not a general purpose device like an iPad. It's just a book; you pick it up and read it. Sadly inside it is a computer and not a very good one. The user interface for anything other than reading books is terribly designed. Interaction speed is improved in Kindle 3, but still terribly sluggish. And Amazon continues to waste 20% of the surface area with a keyboard. Kindle 3 has removed the most useful keys, the number keys, so now navigating large documents requires a clumsy on screen keyboard. But all the bad-computer awkwardness goes away when you use the Kindle as a book. And it's a very good book.
I get a few shekels if you buy a Kindle via my links