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.<p>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.
I love the simplicity of posterous and how they handle pictures + video.<p>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.