Apple's new $1,099 iMac will undoubtedly be a popular computer. People in the know who want the most computing bang for their buck would be smarter to step up to a higher-end model, but there are plenty of people—casual users, schools, businesses—who just want an iMac that's "fast enough," not one that's "as fast as it could possibly be."
For those people, we obtained one of the new entry-level iMacs so we could evaluate its performance. On paper, it sounds like a big step down—you're going from a quad-core desktop processor and GPU to a dual-core Ultrabook processor and GPU. This new iMac and the base MacBook Air models in fact use the exact same processor, even though historically there's been a big performance gap between MacBook Airs and iMacs.
In practice, the story is more complicated. Let's talk about what the new low-end iMac changes, and then we'll spend some time looking at processor performance.