How worried is Apple (AAPL) about the competition? Plenty.

The company knows that tablets based on Google's (GOOG) Android platform are compelling. They're pretty darn affordable, too, especially when compared with the $499 iPad and even the $329 iPad Mini announced Tuesday.

So in a rare acknowledgement of a competitive threat, Apple featured Google's Nexus 7 Android tablet on stage in its iPad Mini presentation -- and then proceeded to assault the tablet as inferior in every way.
"Others have tried to make tablets smaller than the iPad," marketing chief Phil Schiller said at the event in San Jose, Calif. "And they've failed miserably."

Schiller focused on the screen size of both tablets, pointing out that the way the iPad Mini was designed -- with fewer buttons and no black edging around the screen -- gave the Mini a 35% larger display area. For Web surfing alone, he said, the Mini's display area is 50% larger in its portrait configuration and 67% larger in its landscape configuration.

"There is a gigantic difference between these products," he said. One area he did not choose to highlight, however, was maps -- a good idea given the hubbub over Apple's inferior maps on the new iPhone 5.

The side-by-side comparison shows that Apple is clearly aware of the threat that smaller, cheaper tablets present. The Nexus 7 has won critical praise, and it starts at only $199. The new Kindle Fire HD tablet from Amazon (AMZN) also starts at $199, and more than 1,300 customer reviews on Amazon's site give the tablet an average rating of four out of five stars.

"It was kind of remarkable to see Apple taking what some would call the 'low road,' and actually comparing their product to that of the competition in such unkind terms," wrote TechCrunch's Sarah Perez. "It's the first time that Apple has really taken the trash-talking to this level -- at least in recent years."

So does the iPad Mini have what it takes to beat back the competition? Apple certainly did a nice job with the device. It's about as thin as a pencil and weighs .68 pounds, or about as much as a pad of paper, the company said.

Its screen measures 7.9 inches diagonally, larger than the 7-inch tablets from Google and Amazon. It comes with a 5-megapixel camera and has about 10 hours of battery life. It's a well-designed, good-looking product.

But Apple boldly decided to give it a $329 starting price for 16GB of storage space -- a full $130 more than the 16GB Kindle Fire from Amazon and $80 more than the 16GB Google Nexus 7.

Will tablet buyers pony up the extra cash for an iPad Mini? Apple's already got a huge start on the competition. It has sold 100 million iPads in two-and-a-half years. It sold more iPads in the second quarter of this year than any PCs sold by any computer manufacturer.

"We know we are just getting started," CEO Tim Cook said in Tuesday's presentation, adding later that "we're not taking our foot off the gas."

Investors might need a little more convincing. Apple shares dropped more than 3% in afternoon trading Tuesday to $613.80. Google shares were up less than 1% to $680.89, and Amazon shares rose less than 1% to $235.03.

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