Ryan's grandma is legally blind and can't read anything smaller than about 24pt text. We bought her a Kindle for her birthday because she can increase the size of the text to the point where she can read it. She was so excited when he showed off his Nook and she was able to read what was on the screen, because anymore she is limited to audio books.
We have a buddy who's a small truck driver. He recently bought a Kindle and said this is the first time in years that he's actually sat down and read books. He can bring it with him on long days and take a break and get some reading done, and if he's bored with the book he's currently on he can switch over and read one of the magazines he's got a subscription to. Given the choice, he would just not bother buying or checking out physical books, but he's devouring them on his Kindle.
We got the entire White Wolf series of books so that we can bring them with us to LARP. Considering they're often $35 apiece and therefore nobody else has the whole set, they've come in handy many times. And since the printed books are all hardbound and the size of a small textbook, even the people who have them aren't going to lug around several BOXES of books to a biweekly game.
We download all our books for free, but the ones I like I still buy. There's something about holding a book and getting to enjoy its cover, and being able to easily lend it to other people.
Conversely, we bought my mom a Kindle last Christmas because she reads SO much, but she never uses the thing. She likes it but doesn't understand how to get books onto it or where to find them, and she doesn't buy books so the Amazon store isn't much help. She still prefers going to the library. It's frustrating because when we got it we told her "If you don't think you'll use it, let us know and we'll just exchange it for something you'll use" but she didn't want to tell us that she wouldn't use it because she thought we'd cry for days over it, so it was kind of a waste of $200. It's definitely not for everyone.
As far as the e-ink debate, we've found that turning the brightness down on the Nook makes it a fairly moot point. I don't think I could read it for QUITE as long as paper or e-ink without getting eye strain, but it's a pretty negligible difference. The fact that it's a tablet computer is enough to make me very happy we didn't go with the Kindle. The newer model may be easier to use, but we found that the one we got for my mom was a pain in the butt to get around on.