It's an interesting fit with AMD's plans to build on the success of its Opteron chips and open up HyperTransport for the development of dedicated co-processors (including physics engines and Java machines). AMD needs the expertise of a motherboard and chipset manufacturer to get this project, code-named Terrazzo, working well, and to drive the development of 64-bit servers.
It'll also counteract the Intel push to own the home PC platform, with a strong media PC alternative to Viiv. ATI's a strong player in the Windows Media Centre space, so it should give AMD more traction with OEMs and other hardware manufacturers.
All in all good for the industry. But I'm not sure what it'll mean for Nvidia in the short term.