The more I read into things, the more I feel that nvidia is more concerned with the GPGPU market than they are with the traditional video market, at least right now. Scientific computation and modelling software is slowly being adapted to GPGPU technology, and the potential for growth in this field is immense. I feel that nvidia are more concerned with creating a viable competitor for larabee than for AMDs gaming cards.
It does make some sense I suppose... The growth of GPGPU products is exponential right now, whereas the PC video card market isn't far off flat. Nvidia have already established themselves in the PC video market, having a good relationship with OEMs and having established themselves as the market leader in the minds of casual gamers (TWIMTBP etc). A second consecutive "win" for ATI (with the 4800 and 5800 series) will erode this, but only slowly. They will retain a good market share for the next couple of years, even with inferior products.
When the next-gen consoles are announced, we will no doubt see nvidia and ATI fighting for contracts once again. It's a fair bet that one will build the hardware for MS, whereas the other will build the hardware for Sony.
Anyway, I think these are very interesting times