The netbooks are pretty popular, and will run any winXP software, but the processor specs tell most of the story
http://en.wikipedia.org/wiki/Intel_Atom
read the part about "Architecture" - basicallly they are saying that you get a full XP machine, with a slow processor.
Which is fine if the most complex program you run is MSOffice. CAD, any 64-bit application (windows 7?) photoshop, Real Player(lol!) and you can plan to do a lot of waiting. I've never owned one, but thats what the GFLOP numbers tell me =)
Remember also that most netbooks do not have a CD or DVD drive, you are probably buying yourself into one of these at some point depending on how much playing/installing you do. Not a bad thing, but its another $30 if you need it.
Between the processor, the lack of optical drives, and the small screen (I think that most have a VGA plug so you can use a bigger screen if you want) thats most of how they drive the cost down.
Upsides are size, cost and some have great battery life (YMMV =)
There is still no free lunch in the computer world, but a few of my unit members brought them to Iraq (we were there for 5mo earlier this year) and they were happy with them. If it were me, I'd get one for the wife, dock the laptop that has a lousy battery and just share its cd drive over our home network if I wanted the netbook to run a CD.
-John