It sounds like several people have attempted to frame this discussion as an either/or scenario. But business is never that clear cut. In the case of Apple, their hardware has always been priced higher (and had higher margins) than the competition, even in the John Sculley/Michael Spindler/Gil Amelio days. So "profit" is really a non factor in the equation. What Jobs realized while away from Apple - and brought to fruition upon his return is that the consumer base thinks more in terms of "how will 'x' benefit me?". Whether you're talking about the iMac, iPod, iPhone, iPad, etc, the key driving factor has been how could Apple improve on what's already out there in their respective markets. The iMac broke the traditional "beige box" model of desktop PCs apart, and now all the major manufacturers have moved away from that design motif. The "iDevices" have all redefined their categories, and have been massive successes in the process.
If profit was the sole or even primary basis for these decisions, then Apple could have easily developed less distinctive products over the years. But Apple realized that if you make the product desirable enough, the profits will follow as sales increase. That encompasses everything from external design to UI to the App and iTunes stores. People scoffed at the iPhone when it was first released because of its price, and said it would be a massive flop. But the consumers saw things differently, and the iPhone has grown each year as a result. The most recent quarterly results saw the iPhone generate more profit and revenues on its own than all of Microsoft's business units combined.
It doesn't matter how much profit you make off each computer if you can only sell 500 of them. But if you can sell 5 million of them, then you've made a ton of profit. That's the key here - Apple products are being bought in such quantities as to generate massive profits for the company and its shareholders. If Apple did not place the focus and emphasis on design and functionality that they are now known for, the company would probably have folded back in 1996...
