Reports have been floating about an iPad mini for months, but the rumor has been around since the first iPad, after users complained about the "heft" of the device. However, at the time, then Apple CEO Steve Jobs had made his famous "tablets with a screen smaller than 10-inches in size are DOA" speech (paraphrased).
The report seems to confirm much of the information in earlier rumors: a screen that is 7 inches to 8 inches diagonally and a possible launch announcement by October, with a non-retina display. The sources (of course) requested anonymity in the matter.
Shrinking the iPad would undercut the main idea behind Android tablets with smaller screens: price. Although it's possible that the iPad mini could still be priced higher than competing 7-inch Android tablets, the iPad's dominance among tablets and the so-called "halo effect" could mean that those lower prices won't resonate with consumers.
Microsoft's newly announced Surface tablets may be less affected by the iPad mini than the Nexus 7 and Kindle Fire 2 (or other Android tablets). The Surface tablets - at least the Windows 8 Pro version) - would be most attractive to consumers looking for a full Windows experience in a tablet. The Windows RT versions, which won't run existing Windows software ... we'll have to wait and see.