(The following is rank speculation, referred to by a friend of mine as speaking ex recto. I have no secret sources nor access to any insider info.)
Apple's switch in hardware platforms is about the transformation of Apple into a media company. It will probably still make hardware, and it will probably still dominate certain niche market, but those markets will be ones that matter in Hollywood, like digital editing.
There are lots of reasons for this, and you should expect to see Apple beating the snot out of MS in the media business in the short and medium terms. I'm not so sure about the long term; people who make long-term bets against MS tend to come up empty. Part of the key advantage that Apple has is Steve Jobs. He runs Pixar. He can call up the head of any major studio and get in to see the right execs. They like him - he's one of them. They hate Bill, who they see as trying to muscle in on their business. If you have any doubts about this, look at the number of Hollywood films and TV shows in which characters are seen to use Macs vs those in which they use identifiable PCs. In Hollywood an enormous amount of business is done on handshake deals; Jobs knows which hands to shake and how to speak the language of the people whose hands he needs to shake. He has a track record with the music industry, too, though that relationship is a bit rockier.
The second part of this battle is for the home entertainment center. MS actually has a jump here with its PC customized for that marketplace and Apple needs a major move to catch up. Apple's wedge strategy will be the Mac Mini and Airport, but they're both too damned expensive. Would an Intel-based Mini be significantly cheaper? I dunno. What I do know is that iTunes is also beating the snot out of all comers and is a significant driver for hardware sales. If Apple doesn't have a digital movies deal in place and isn't providing movie/TV content to homes by Xmas this year I'll be stunned. The content for this service will be provided by those execs that Jobs has had lunch with.
I also fear that Apple is signing up for the Intel hardware lockdown. Hollywood, like the rest of the Cartel, is insanely paranoid about its content being "stolen." Intel is offering to wave a magic wand and pretend to make that problem go away. Apple couldn't afford to leave that card solely in MS's hands; by signing up for this, they've neutralized a major advantage Redmond used to have.
It's also true that, to some extent, they're Osborning their hardware sales. But by showing that OS X runs *now* on Intel hardware, Jobs is sending a strong "Don't Panic" message to software developers. Relax, he says, you won't notice any difference. We've got the OS running there now. The low-level guys like device drivers will have to do some scrambling, but Apple will help them.
Along the way, Apple is taking a nontrivial shot at Microsoft's PC-based gaming business. That home entertainment center needs to play games, too. Right now, very few games run on Macs. A few big names, but nowhere near the title span that PCs have. But if Macs are on Intel hardware then game companies have to do much less work to get their games over. And as additional incentive, if Apple has the "in" with Hollywood then it's one step away from the game companies' wet dream of having a major motion picture deal, with all the revenue and licensing dollars that implies. Games' core home computer market won't move off the PC, but game studios now have much more incentive and much lower barrier to entry for getting their games onto Apple boxes.
You can't look at this announcement as a bullet. It's a full broadside, and the impacts are going to be felt over a large range (see Donna's entry below for more big thoughts). It's also going to hit targets other than Microsoft; one likely impact will be on Sony, which also plays in the home-entertainment spaces and which can be seen as a partner and competitor for both Apple and Microsoft. As far as I know they haven't had anything official to say on this topic yet.