That wasn't true of the iPad, nor of the 10" Android tablet (a development board) I had at home for a while. With those, the choice was always between the big tablet and the laptop, and my experience was the laptop always won.
Obviously, the one spot where a 7" tablet fails is the important use case of carrying it around while not using it. So the phone isn't going away. Nor, obviously is the laptop.
But my surprise is that, unlike the 10" model, there was space in my life for a 7" tablet. It's really a very different kind of thing, and it's not surprising Apple wants to play in that world.
The 1.5 cm is a huge difference for most people being able to comfortably hold it the way I and most people I've seen seem to prefer to hold the Nexus 7: in portrait mode, with my thumb on one side and my four fingers on the other. I found a book that is the exact width of the iPad Mini (and it's lighter) and it hurts my hand to try to stretch it that way.
I'm sure some people with large hands will be able to hold it that way, but my opinion (I don't think you're insane if you disagree) is that most people will not be able to do so comfortably.
In short, 15 mm isn't a large difference in the abstract, but it's quite a lot of difference "at the margin," which is what I think we're talking about. I think it takes you from dimensions that maybe 80-90% of people can hold comfortably in the way I've described to ones that perhaps 10-20% of people can.
I sold my Nexus and have preordered an iPad Mini to see if it'll be more usable while still retaining the portability of the Nexus (which I loved - you could actually stick it in your jeans back pocket)
Browsing the web was fundamentally frustrating for me on the Nexus 7 because you'd either be served a mobile site which looked awful because it was meant for a 4 inch screen or you'd be served a desktop site where you had to do a lot of pinching and scrolling to get the text to a readable state which felt like more work than it was worth.
Especially in horizontal mode the Nexus 7 felt like browsing the web through a letterbox because the OS is quite greedy with the screen real estate and the 16:10 doesn't have that many pixels to begin with.
I find I use the nexus 7 far more than any other tablet I have (though admittedly, I don't have an iPad, and even the iPad mini is slightly priced out of my "purchase without thinking twice" range. The only time it isn't ideal for me is when I'm trying to read schematics. At that point I tend to grab one of the 10" tablets I have.
It's not that I'm planning on rocking it like this often, but it's really practical for when you're moving between rooms and have a lot of other stuff to carry.
Home to measure my jeans pockets I guess.
Again, this seems like splitting hairs to me -- trying to come up with something that makes the mini "special" and not just another 7" tablet. Why can't it be just another 7" tablet?
Neither seems particularly significant to me when compared with a 4" phone or 10" tablet which are vastly larger jumps. But obviously that won't stop folks from arguing about it.
But from what I've seen so far, people use it exactly like a bigger iPad. It seems too big to use it as a 4"-7" device, covering it from the back with your hole hand. You'll probably end up using either with 2 hands, or by the side, like the bigger iPad, so there's not much improvement over the bigger iPad there. It is lighter, though.