I still prefer my Kindle 3 to my iPad 3. Although the iPad 3 has narrowed the gap.
When I had an iPad 2, if I couldn't use my Kindle I'd read on my phone as opposed to the iPad - the better resolution of the phone trumped the better size of the iPad. I couldn't stand reading more than a couple of pages on the iPad 2, even though I would happily read for 30 minutes or so on my phone.
I like the iPad 3 better than my phone now, and can happily read on it for a while. But I still prefer the e-ink of the Kindle.