Well, Tablet PC's are just as functional as a full size laptop and also have touchscreen.
BUT, I think the OP is confusing Tablet PC's with the newly formed genre of Tablets, which are cheap, limited function devices that ONLY use a touchscreen, no keyboard or mouse.
As for their appeal, people like having the convenience of a smart phone in their pocket and the modern tablet is just a large version of that. Which of course makes no sense cuz now its no longer pocketable. But dont ever try to explain American purchasing habits as most of them make no fucking sense. Its amazing how people complain about the price of everything nowadays and then continually buy overpriced gadgets they dont even need. For the price of a big screen TV you could give yourself health insurance.