The Mac Mini will come in two default flavors with different hardware configurations, CEO Steve Jobs told the Mac faithful. There will also be built-to-order options for those who demand higher performance.

The $499 gets you a 1.25GHz PowerPC G4 processor, 256MB of 333MHz DDR SDRAM. a 40GB hard drive, a 32MB ATI Radeon 9200 graphics card, and the usual accoutrements such as DVD read drive, USB and FireWire 400 ports.

Those willing to spend an extra $100 get the processor running at 1.42GHz and an additional 40GB of disk space. Optional extras such as an upgrade to 1GB of RAM or a DVD write drive can be added to built-to-order systems. Keyboard, monitor and mouse are not included.

While it’s the cheapest desktop computer Apple has ever offered, its iMac boxes starting at $1,299 when bought from the company’s web site, for many potential buyers it will not be a slam-dunk value proposition against Windows-based PC competitors.

Fifty dollars less spent with Dell, for example, would buy a box with 2.4GHz Celeron processor and half a GB of RAM. No graphics card would be included, but a 17-inch monitor, mouse and keyboard would.

Both Mac Mini boxes will stand two inches tall and weigh 2.9 pounds, Apple said. They will ship with Mac OS X and iLife ’05, Apple’s new suite of digital media management applications, which was also announced yesterday.

If there was any doubt Apple is aiming at Microsoft turf, the company dispelled it by also introducing its own suite of office software, iWork ’05. The package contains Pages, a new word processor, and Keynote 2, roughly equivalent to Microsoft PowerPoint.

The Mac Mini sees Apple following up the mainstream success of its iPod portable music player, which has sold 10 million units to date, and iTunes music store with a computer aimed squarely at the mass market.

Jobs announced that the company moved 4.5 million iPods in the fourth quarter, in line with analyst estimates, then introduced a new flash memory budget version of the popular device.

The iPod Shuffle is a smaller, feature-restricted version of the classic device, available in two models each weighing less than a pack of gum, about twice the physical size of the typical storage thumb.

The 512MB device holds up to 120 songs and costs $99, the1GB device doubles the song capacity and will sell for $149. The devices have no displays, but do a have a switch that enables the user to listen to their songs in order or shuffled.