We have already said that Larrabee will enter the market as a professional processor, but as soon as Intel starts producing it for the gaming market, Larrabee will become a high-end graphic chip.
This will definitely put a lot of pressure on Nvidia and ATI, but Intel needs the high-end market to change consumers' minds about Intel’s graphics.
Intel has traditionally been the worst gaming graphics chip manufacturer and Nvidia and ATI are simply doing a much better job, even with the integrated stuff. Intel must change this in order to get into the discrete market.
Intel needs a Halo effect the way Microsoft has done it with their Xbox 360 and other video games. Apple has done it with iPods and iPhones, while Nvidia is doing it with its graphics cards. Intel is the next in the “Halo” line, come 2008.