Just a week after Microsoft Corp. announced its new Surface tablet, Google Inc. has launched its own tablet—and all signs point to it being a direct competitor to Amazon's Kindle Fire.

Google unveiled its take on the tablet—small and budget-friendly—at its developer conference, Google I/O, in San Francisco today. The seven-inch tablet, made by manufacturer Acer, will sell for $199—the same price as the Kindle Fire of the same size and less expensive than Apple's iPad 2 which starts at $399. Microsoft has not yet said how much it plans to charge for its new Surface tablet.

The Nexus 7, which will ship in July, offers a quad-core processor and up to 8 hours of battery life, Google says in its description on Google Play, Google's marketplace where it is selling the tablet. It features a 1280x800 high-resolution display protected by scratch-resistant Corning glass. It's powered by Google's newest Android operating system, Android 4.1 or Jellybean. It weighs 12 ounces compared to the Kindle Fire's 14.6 ounces.

Unlike Microsoft's just-released Surface, which many experts say is targeted toward businesses, the Nexus 7 is designed for entertainment.

"Nexus 7 was designed with gaming in mind. With heart-pounding quad-core performance and sensors like a gyroscope and accelerometer–do a barrel roll then tilt, touch and tap your way to the top of the leaderboards while exploring over 600,000 apps and games available on Google Play," the tablet's description reads on Google Play. An accelerometer senses when a smartphone is being moved and in which direction, reorienting the display between horizontal and vertical when the phone is turned.

Hinting at a gaming and apps push, Google is giving consumers who buy a Nexus 7 a $25 credit to spend in the Google Play store.

Microsoft's Surface, on the other hand, seems more like an alternative to a netbook or laptop with a larger 10.6-inch display, heavier 1.5- to nearly -2-pound weight depending on the model, and a cover that can swing over to create a flat keyboard with track pad that the user can type on.

Rather than compete with the Surface, Forrester Research Inc. analyst James McQuivey says the Google tablet is going head-to-head with Amazon's Fire, with its low price tag, smaller screen and tie-in with a marketplace full of apps and games.

"Learning a lesson from Amazon, Google can see that the only way to beat the premium-worthy iPad is to go for the millions of customers who are ready for smaller and cheaper tablets, and then grow those customers into more Android-powered devices and, more importantly, Google-powered services like Google Play and whatever paid video experience YouTube will likely create," McQuivey says. "That range of services will be the secret to stitching together this fleet of Android gadgets into a platform that can compete with Apple for minutes of user's attention rather than premium device dollars."

However, Forrester analyst Frank Gillett says Google may have a tough time taking on Amazon and Apple's robust digital marketplaces—particularly because of Google Play's lack of tablet apps.

"Google's user base for music, books and movies is not nearly as strong as Apple or Amazon, so it will take time to build a strong customer base," Gillet says. "But Google's real tablet problem is the lack of compelling tablet-optimized apps." He says Google has yet to motivate developers to fill the gap.

Avi Greengart, research director, consumer devices, at Current Analysis, points out that Amazon also has the $79 Amazon Prime program, which includes free two-day shipping for physical goods and plenty of free streaming content for the Kindle Fire that Google doesn't have. Still, if Google has one thing on its side it is its determination to compete with Amazon, Greengart says.

"Google is tired of Amazon staking out the largest position in Android tablets without actually using any of Google's services, and it has decided to see if it can play in that market as well,"Greengart says.

Forrester estimates consumers will own 760 million tablets worldwide by 2016, up from 191 million in 2012. Prior to today's announcement, Forrester's forecast for global installed base of tablet operating systems was 68% iOS, 16% Android and 16% other for 2012,  shifting to 53% iOS, 8% Google Android, 18% Windows and 21% other by 2016.

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