Amazon’s Kindle Fire is powered by the cloud

UPDATED: Amazon (s amzn) is finally jumping into the tablet market with the Kindle Fire, a 7-inch $199 device built off Android (s goog) with its own custom interface and plenty of hooks into Amazon’s marketplace of  digital goods. But beyond being just a cheap tablet, the Fire is leveraging a lot of Amazon’s smarts across its inventory of assets, including some very impressive work in the cloud. That reliance on the cloud makes sense for Amazon, which is using all its strengths to help launch the Kindle Fire, just like Apple has poured in great design and user experience into its tablet.

The tablet announcement was part of a broader unveiling of new Kindle readers, including a $79 non-touch model, a $99 Kindle Touch and a $149 Kindle Touch with 3G. The Kindle Fire, which ships on Nov. 15, taps Amazon’s existing library of e-books, magazines, video and music content. That alone will make it an instant contender because of its easy access to media, something only Apple (s aapl) has been able to achieve high marks in so far.

The Kindle Fire also taps into Amazon’s cloud infrastructure to offer free cloud storage and backup of all content, so users don’t have to worry about irrevocably deleting something from local storage. And there’s also simple wireless syncing and integration of Amazon’s Whispersync technology in movies and TV shows, so users can keep their places in videos when they switch from one device to another.

But perhaps the coolest use of Amazon’s technology is in the new Silk Browser, which lives on the device but also on Amazon’s EC2 cloud infrastructure. The split browser is able to do a lot of the heavy lifting of browsing the web on its own servers, and it then optimizes the delivery of the content on the device itself. It only sends what is necessary for a site to look good on a device, which boosts speed and performance. Also, because many websites are already hosted on Amazon Web Services, it means those can be displayed even faster. The Silk Browser also uses what it knows about users and their aggregate reading patterns and prepares in advance to show pages that are often read in succession, so new pages are delivered very quickly.

On paper, the Kindle Fire may not be going toe-to-toe with the iPad. It will not only be smaller but also will not sport any 3G options (just Wi-Fi) and won’t have a microphone or camera. Amazon will offer a 30-day free trial of Amazon Prime, a $79 annual service offering and free two-day shipping on Amazon purchases, along with a streaming video service. The 14.6-ounce device will sport a dual-core processor, offer 8 GB of local storage and will have an IPS display that renders 16 million colors at 169 pixels per inch. It’s unclear what version of Android it’s running and the speed of the processor.

The device definitely uses an early version of Android, but Amazon has built its own interface layer that hides the Android underpinnings. It’s an approach that Barnes & Noble (s bks) also undertook with its Nook Color. The interface on the Fire looks great and seems extremely snappy. Users get a search bar at the top and then a selection of  books, music, video, docs, apps and the web. There’s a carousel of recently added content and then a shelf for favorites.

As my colleague Erica pointed out, the Amazon tablet can thrive without being an iPad killer. That appears to be the approach Amazon is taking. It’s very affordable and looking to build volume with a $199 price, which should entice a lot of new and some existing tablet buyers. It will also put a lot of pressure on current tablet makers, including a host of Android manufacturers and Research In Motion (s rimm), with its struggling Playbook. As CEO Jeff Bezos constantly reminded during his press conference, Amazon is trying to provide value at a great price.

“We’re building premium products at non-premium prices,” he said. “We’re determined to do that and we’re doing it.”

At that price, with that set of services and features, this could be a lot of users’ first tablet. Coming right before the holiday season, it should be an easy gift for consumers. And though I think the iPad is still the king, the Kindle Fire could lure some people away who may not need all the features of the iPad. Others, who need more apps, or who prefer the iPad hardware or iTunes over Amazon’s collection of content, will likely stick with the iPad. But the Kindle Fire should make a lot of tablet competitors worried.

It still has questions to answer. Will the curated list of apps in its app store be enough? What will the emailing experience be like? How much marketing muscle will it put behind the Kindle Fire?

Bezos also unveiled a $99 Kindle Touch, a smaller Kindle e-reader with an infrared touch display. A 3G version was also introduced with free cellular wireless for $149. The devices are 30 percent lighter, at just 5.98 ounces, and 18 percent smaller than previous models. The devices, which are available for preorder, will ship Nov. 21. Amazon is also selling a new Kindle non-touch for $79 that ships immediately. It appears that all models are shipping with Amazon’s Special Offers ads, which helps explain their cheap pricing.

UPDATE: Here are some more details on the Kindle Fire. It will ship with its own email application that supports IMAP and POP3, but the Fire will rely on third-party apps to provide Exchange support for email. The device will also ship with contacts, shopping and gallery apps but no calendar app. Users will be able to sideload their own content, including photos and videos, with most of the popular formats accepted.

Amazon will go through its Appstore for Android, which has more than 15,000 apps, and filter out those apps that won’t work on the Kindle Fire for users who visit the store from a Kindle Fire. The company is approaching app developers to build new apps and optimize existing titles for the Kindle Fire, but it’s not putting out its own SDK. Instead it will encourage them to use Google’s existing tools. Amazon has started talks with Twitter, Facebook, Pandora and Netflix to optimize apps for Kindle Fire, but it’s too early to say what will happen.