Availability is much better than I expected. They’ve had about 2/3 of the albums I’ve searched for.
Pricing is fantastic — every album I’ve searched for has cost $8-10, and those are all 256 kbit/s MP3s with no DRM.
Apple has not been able to negotiate similar availability for iTunes Plus (DRM-free 256 kbit/s AACs). I’ve only ever found one iTunes Plus album in my searches. None of my sought albums, with or without DRM, cost less than $10.
Apple should be worried. iTunes isn’t losing most of its business anytime soon, but this is a significant long-term threat — especially if Amazon continues to negotiate better distribution deals from the labels.