What were they thinking at the time?

http://www.youtube.com/watch?v=9046oXrm7f8 seems to be the answer. See also http://www.wired.com/gadgets/mac/commentary/cultofmac/2006/1... . You can also see how the Digital Hub idea evidently influenced the layout of the Apple Store http://lowendmac.com/orchard/08th/roots-of-the-apple-store.h... : the stands devoted to a particular kind of task, with appropriate gadgets attached to a Mac.

Thanks for the info.

In the first video Steve Jobs talks about the history of the PC. The prehistoric age, the golden age, the internet age, and then the age they felt we were entering: the digital lifestyle age. That was an accurate assessment of the market. That was also only 5 years before the iPhone was released. I would be surprised if they weren't already planning for it and envisioning further development in the handheld market.

With regards to the digital hub, they don't use the term anymore, but it's still an accurate description of the mac (and iTunes for Windows).

I think what they were looking for was a trojan horse product, something you buy and then end up buying more products as a result. Think about the iPod, iTunes on Windows is meh...you end up getting an Airport, but eventually a lot of those people ended up buying Macs.