This is a surprising decision. I think most people were expecting Amazon to move away from Mobi but they probably expected Amazon to adopt EPUB especially as EPUB 3.0 is near release.
Epub would've been nice for us, but this makes more business sense.
The Kindle devices are cheap & low margin; Amazon's profit is from the content.
They've got a customer mindshare majority (What's an ereader? Oh, you mean a Kindle), and a large author base.
Why would they open up their devices to competing publishers?
As I mentioned in another comment here, on October 11, the IDPF membership unanimously voted to elevate EPUB 3.0 to a final IDPF Recommended Specification. Apple's iBooks (e.g. on the iPad) already supports some parts of EPUB 3.0 [1], and Kobo says they'll have an e-reader device that supports EPUP 3.0 in the next 3-6 months [2].
Really, only those engaging in magical thinking and unfamiliar with the way Amazon works expected Amazon to adopt ePub. I never did and said so repeatedly.
