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Google's product seems aimed at the same market segment as the Kindle Fire (the low end). I don't think it will have any noticeable effect on iPad sales. Apple is aiming at a different consumer.
However, there are rumors of a 7 inch iPad coming. If it does arrive then it might be the final nail in the coffin of other tablets. The iPad and its ecosystem are incredibly popular. A 7 inch iPad would make a huge impression on the lower end of the market.
I suspect Apple is already well into preparing for an iPad mini launch. If it happens then Google's tablet is DOA, as are Microsoft's. The iPad is already moving into the enterprise, and Microsoft hasn't even released its products yet.