The largest question surrounding Westmere is how an integrated graphics solution which is actually placed on board the CPU will interact with discrete graphics solutions. At this point, it can only be speculated. But the fact that Intel has chosen to pursue a lawsuit which argues that Nvidia does not have the legal right to build chipsets for Nehalem processors, including the Core i7 and upcoming Westmere, is telling.
It may be that Intel feels that once graphics are integrated onto the processor itself, the company should no longer have to support integrated graphics solutions placed on motherboards. If Intel can successfully argue that Nvidia does not have the legal right to produce chipsets for Intel's newest products (and thus wins their case), then it eliminates the need to be concerned about compatibility. Intel, and only Intel, would be providing chipsets for its processors, which would result in the eventual vanishing of motherboard-integrated GPUs from Intel-based machines. An upcoming article will discuss Intel's attempt to knock Nvidia out of the chipset game in further detail.
For the consumer, this results in both advantages and disadvantages. On the plus side, the integration of a graphics solution onto the CPU is another step towards what appears to be one of Intel's long term-goals, which is moving towards building "systems on a chip" - processors which include most of the functionality which is traditionally the responsibility of the motherboard. Doing this could result in lower power requirements and physically smaller hardware, which would in turn reduce costs and make it easier to build small, light, and thin mobile computers which are also reasonably powerful.
On the downside, this would allow Intel to prevent any company from providing competition to Intel in the integrated graphics and chipset market. This is not a good result for consumers, because Intel's integrated graphics have always been the least appetizing of any integrated solution available. Intel has always seemed unwilling to push any significant improvements in its integrated graphics products, and getting rid of Intel's only competition in that arena would only lessen Intel's incentive to think up better products.
If you're not an enthusiast, this would affect you directly, as most pre-built computers which do not include discrete graphics would, by default, be left with Intel integrated graphics. If you are an enthusiast, this change would have less of an immediate effect. However, the fact that all Intel-based computers would ship with an Intel integrated graphics as standard would create a certain base-line level of graphics performance. Considering how poor Intel's graphic solutions perform, this sort of base-line could very well hinder efforts to create better operating systems with more 3D elements. It would also do nothing good for the PC gaming industry. It might help out AMD though, since they would be the only company to offer a CPU that will run on a platform with decent integrated graphics.
The results of the lawsuit which Intel currently has filed again Nvidia will significantly determine how the future plays out. If Intel can deny Nvidia the chance to make chipsets for their new processors, then Intel will be clear to proceed with its plan to make integrated graphics part of the processor, not the motherboard. If, however, Intel loses or decides not to follow up on the lawsuit, then Intel will have to compromise with Nvidia. In such a situation, the market probably would not change significantly, although it is possible that Intel might try to press harder on Nvidia by refusing to cooperate with their attempts to make their own chipsets for new Intel products.
It will also be interesting, in the long term, to see how AMD weighs in on this debate. Unlike Nvidia or Intel, they span the gap between CPUs and GPUs, as they offer both products. Their plans for CPU-integrated graphics, codenamed Fusion, have been delayed to 2011. Obviously, AMD does not make chipsets which are compatible with Intel products. But any change in the dynamic between Intel and Nvidia could result in a response from AMD, perhaps getting the latter pair to circle their wagons together.