We reported a month ago on the story of Raspberry Pi, the miniature and dirt cheap Linux PC that was entering production. Available in $25 and $35 versions, even the barebones Raspberry Pi is a capable little PC, able to run the Linux operating system and output high definition video.

Any suspicions that the concept was too good to be true and that production delays would turn into a fizzle of a launch have been officially been shot down: the Raspbery Pi is now for sale and production units are shipping from China. Demand has been so great for the mini PC that retail partners’ websites crashed under the volume, despite the fact that buyers have been limited to a single PC per order (at least during the launch period).

Doubters who questioned whether the Raspberry Pi Foundation would be able to hold to the very ambitious $25 and $35 price points also have some crow to eat; not only did the computers come in at the promised price points, but the specs were upgraded on the entry level model, doubling the RAM from 128Mb to 256Mb.

Sweet-tooth hardware

For those who want a tiny computer but are reluctant to embrace the not exactly user-friendly Linux operating system, another option is now available for pre-order. The FXI Cotton Candy is even more compact than the Raspberry Pi (one has to wonder what’s with the dessert-themed names) coming in at about the same size and form factor as a USB thumb drive. The Cotton Candy is significantly more expensive at $199, but it has much more powerful specs: an ARM CPU from Samsung (PINK:SSNLF), Wi-Fi, Bluetooth, HDMI and a quad-core graphic processor, plus it runs Android.

Dell (NASDAQ:DELL) and other PC makers with budget desktop computers probably don’t have anything to worry about from Raspberry Pi or Cotton Candy, at least in Western markets. The current appeal is mostly to hobbyists looking to use them in projects or specialized applications such as do-it-yourself home media streamers.

But these ultra-compact computers could have industrial applications and they may prove a threat to established PC manufacturers when it comes to emerging markets where a $400 PC is a luxury. The Raspberry Pi Foundation is also planning an educational launch to follow later in 2012, where there will be a push to get the low-cost machines into UK schools to encourage an interest in computer hardware and programming.