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Micro blogging by email would compete with posterous for sure, while blogging by email for the soul purpose of being on a blog would still be intact, especially if you're already pulling in posterous feeds into friendfeed.

I think it gives people who aren't exactly looking for a blog setup for a place to send their items. I feel bad sometimes doing a one liner email to posterous where it dilutes the blog's other content with small posts. Putting small micro posts to friendfeed would be much better in those situations.

Wordpress also launched that recently, so Posterous better be prepared for more competitions.
I love the simplicity of posterous and how they handle pictures + video.

They can also autopost to other services. But, so can friendfeed. And friendfeed has features on top of that like rooms, a realtime feed, and support for tons of services.