It's for specific purposes. There are many on-the-go people that need their laptop everywhere (in their backpack from places to places), who want something very, very light.
The MacBook Air is lighter and thinner than any other laptop. But think of it as a second computer. The one you use at home is the main computer, this one's for when you're out and about and want to keep your documents with you.
Don't need this kind of portability? Can't afford it? Then it isn't for you.
If you want a small laptop with CD and ethernet and everything else, then they always do the regular MacBook. Not much larger or heavier, and certainly cheaper.
The MacBook Air is for those who demand something smaller and lighter, because they have it with them everywhere. To lose that weight and size, they have to lose things. You can't have everything. This doesn't fit the bill for everyone.