It's like an ultrabook, except the keyboard is detachable so it turns into a keyboard. It's meant to compete with all the convertible ultrabooks out there, which cost about the same, and have similar specs and price. Seems completely reasonable to me.
Just to help with any possible confusion, there is no Surface 3, only a Surface Pro 3 (which runs Windows 8.1) and a Surface 2 (which runs Windows RT). So the Surface Pro 3 has proper laptop functions.