Take a look at the list of best selling products in electronics section on Amazon.com. As of recently 3rd generation Apple iPod Touch 32GB has climbed to the second place. Currently it is outsold only by Kindle 2 and is trailed by Kindle DX. This is interesting since Kindle has had prime advertising spot on Amazon.com homepage for quite some time now, while the Apple product generates sales only because of this popularity and the fact that Amazon sells it at $20.00 discount compared to the official Apple store and provides free shipping.
Technically it also can be considered Kindle related merchandize since it can run Kindle application that is available in Apple app store.
While it has been widely rumoured that Apple will release tablet PC type device that will compete with eBook readers, the fact that two companies cooperate this much indicate that Apple will not be competing with Amazon in this space. Just look at all the current news about Apple Google feud around Google voice application for iPhone. There’s clearly competition there and no cooperation at all.