We've just heard about it yesterday that Amazon is planning on creating their own *Android* app store, and get developers to create apps for that store. Now, we have confirmation that Amazon will also make an Android tablet. But let's take things one at a time.
If Amazon creates an app store, along with Verizon's V-cast store (and probably others will follow them soon), this will end up fragmenting Android's platform even more. First, we had a bit of app incompatibility when Android kept jumping from major version to major version, while manufacturers were very slow to update their phones. This is changing now because manufacturers seem a lot faster to update their phones, and Google is also starting to put some of their core apps on Market.
Then we have the UI fragmentation, with every manufacturer putting their own skin on top of Android. They did this from the beginning to try and make Android more useful, and some of them will continue to do this on tablets and other devices where Google doesn't get too involved.
However, Google promised an UI overhaul with Gingerbread, and hopefully this means manufacturers won't have to create their own skins anymore to improve the Android experience. There are other ways to add value, they just have to think about it. I believe HTC is in the right direction with their new HTCSense.com services and their others ways in which they hope to bring value to their Android handsets besides just a skin. In 2011 we should see less UI fragmentation if Google plays their card right.
Now, this 3rd fragmentation wave (and probably not the last) is the app store fragmentation trend. Soon, we might notice that everyone tries to create their own Android store, to capture some of the value from the Android eco-system for themselves. Amazon is certainly a big player in this and they can offer not only a global payment system for users and developers (unlike Google), but their store could actually be a whole lot better than the normal Android Market, knowing how Amazon's recommendation engine works.
Since Android is so open, this might not be the last fragmentation Android will experience. However, things tend to be chaotic only in the beginning. In the end, I think this is actually competition at different levels in Android, and it will only end up helping the user get the best products and services.
Amazon getting on board the Android train is also a sign that Android is benefiting from huge momentum and it's not going to slow down very soon, even with the emergence of WP7, RIM's new OS, Meego and WebOS 2.0. None of those will have the ability to spread the way Android can.
As for Amazon's new tablet, that might replace the Kindle if it's similar in price, I think we'll see a Mirasol touchscreen tablet that will act primary as the best e-reader device out there (offering color on reflective display) and seconday as a tablet you can use for other stuff. It has been rumored that Amazon is the big client for Mirasol technology from Qualcomm, but if that's not true I would imagine they would at least put PixelQi on it so it can act as both reader and tablet.
I don't see Amazon doing just a tablet like everyone else for the sake of entering the tablet market. In the end their sole purpose is to sell more ebooks, and those are sold a lot better on e-readers than on iPads for example.