The Retina display is a fantastic engineering accomplishment, and as a typography geek I love it, but I don’t think it’s why the iPhone 4 is selling well.
Could be, but don’t forget network effects. A retina display would likely be one of the differentiating factors between the iPad and other tablet devices for a while. And geeks would likely weigh the pixel density in their decision on what tablet to get.
The masses tend to buy the devices they see in use. So if you want to capture a new market, you should capture the early-adopters, and they are the kind of people who like things like a retina display.