Canon recognizes the large non-pro market that wants to take pictures. They entered the digital SLR market by releasing a solid, competitive, but distinctly non-pro 30D at half the price of the newly released Nikon D1, and at almost 10% the cost of professional cameras just years before. Canon's US marketing campaigns in the 1990s involved well known tennis star Andre Agassi shilling for the Canon's decided mass-market Rebel film line (Kiss, in Japan). Market progress being is it is, Canon has again decided to undercut the competition by releasing a digital form of the Rebel (EOS 300D) which behaves strikingly similar to their now mid-market EOS 10D but for a price of $900 (body only) or $1000 with an 18-55mm kit lens.
The kit lens is part—and currently the extent—of Canon's new EF-S lens line-up. While Canon's professional cameras (the 1D and 1Ds) have used other, larger, imaging sensor sizes; they've remained relatively consistent with their other models using a 15.1x22.7mm size. With the EF-S mount, they've formalized this as a standard size for their future non-pro cameras both at the X00D (Rebel) entry level and likely an upcoming 20D at the mid-range. Designing lenses specifically for a smaller sensor has benefits stemming from the lenses requiring less glass: they'll be both cheaper and lighter. Because EF-S mount cameras accept the full line of EF lenses, but Canon's high-end cameras will not work with EF-S, it's unlikely that we will see Canon's top-of-the line "L" lenses available for EF-S in the foreseeable future. Users who find they needed lenses not provided by the EF-S line-up will pull them from Canon's extensive EF collection at which point they might even consider upgrading to a higher-end camera.
What about the camera itself? It is a smaller, plastic, version of the 10D with some features disabled in firmware. Take a look at the spec sheet, hold both of them, and determine which one you like better.