Surface is also Microsoft's tablet for Windows RT. The problem is that there are very few applications written for RT today. So Microsoft's announcement that each Surface for RT tablet will be bundled with a version of Microsoft Office must make software developers happy. Lots of Surface for RT tablets will be purchased for Office alone.
The Surface for RT announcement must have Android tablet makers very worried. While they have the advantage of lots of apps available, and Android 4.0 is a good OS, the Surface for RT announcement means that Android will compete primarily on price. Will customers pay a premium for an Android tablet? Not with iPad and Surface tablets available. It looks like Android has been permanently consigned to the under-$250 price range.