Apple Inc. 's answer to the increasingly cutthroat tablet-computer market: more product choices and free software.

At an event here Tuesday, Apple showed off a new full-size tablet--now called iPad Air--that is thinner and slimmed down to one pound. It also revealed an updated iPad Mini with a faster processor and a sharper display.

Just as important, Apple's new holiday lineup lowers the entry price for the cheapest iPads to below $300 for the first time. Apple said it will sell a range of tablets starting with last year's iPad Mini for $299, up to the new iPad Air, which starts at $499. That brings Apple closer in line with competitors like Amazon.com Inc., who have pushed tablet prices down as far as $229.

Apple also said it would offer for free access to its iWork productivity suite, which competes with Microsoft Corp.'s Office, and iLife photo, movie and music making apps for customers buying new devices. The company used to charge between $4.99 and $9.99 for each program.

Following the announcements, Apple's Chief Executive Tim Cook said the changes amounted to 'the biggest iPad announcement ever, by a large margin.'

Improved technical specs, coupled with free software, may help Apple appeal to more customers, particularly students and small businesses, said Patrick Moorhead, an analyst at Moor Insights & Strategy. 'You're not paying extra money for the brand, you're getting real technology to back it up,' he said.

The new iPads and changing software strategy come at a critical time for the Cupertino, Calif., gadget maker. For the first time, Apple sold fewer iPads in the three months ended in June than the same period a year earlier. Rivals including South Korea's Samsung Electronics Co. and Amazon are eroding Apple's one-time dominance of the tablet market.

Research firm Gartner expects Apple's share of the tablet market to fall below 50% this year, down from 54% last year and 65% in 2011. Tablets powered by Google Inc. 's Android software are expected to hit as much as 50% of the market this year, up from about 45% last year.

Nokia Corp. unveiled its first tabletcomputer Tuesday. Also Tuesday, Microsoft, which plans to acquire Nokia's mobile-computing business, put the second version of its Surface tablet on sale.

Google, Sony Corp. and Asian manufacturers including Asustek Computer Inc. and Lenovo Group Ltd. are pushing tablets of their own.

Apple's answer this year was to fix complaints about its current lineup, adding in its latest processor, the A7, to the new devices, making the iPad lighter and giving the iPad Mini a sharper screen.

The iPad Air goes on sale in the U.S. and a host of other countries, including China, on Nov. 1. The new iPad Mini will go on sale later in November, the company said.

'I can't think of another product that's come so far, so fast,' Mr. Cook said during the event, noting that Apple has sold more than 170 million iPads.

One bright spot for the company is that even as it loses market share, its customers remain the heaviest users of tablets.

Mobile-advertising firm Chitika Inc. says 84.3% of the website traffic from tablets that it analyzed in June came from iPads. Amazon's Kindle Fire tablet ranked second, with 5.7% of Web traffic, followed by Samsung's Galaxy tablets, with 4.2%. Usage of the iPad increased from May to June, Chitika said, while the others declined.

'Regardless of what you might hear or read about how many are sold or activated, iPad is used more than any of the rest,' Mr. Cook said, adding that the iPad is used four times more than competitors.

Among other announcements, Apple said a new version of its computer operating system, OS X Mavericks, along with updates to 20 more of its apps, would be available for existing customers to download free immediately. In the past, Apple has typically charged for major software updates, particularly for its OS X operating system.

With the free software approach, 'we are turning the industry on its ear,' Mr. Cook said.