It has been pretty well said here, but it's worth saying again to make sure it sinks in. Projects like the o2 are showing that with competent design, an extremely competent amp can be built for about $100 in parts shipped to your door. There are already some manufacturers selling this exact design, built, for about $150 (although I believe that is without the $20 AC power supply), so that's pretty much the bottom of the market for a full featured amp that can drive almost anything under the sun. If a really big manufacturer were to start building a design like this in volume, they could probably drive the price down to $100 or so. Under $100 you are looking at competent designs like the Fiio e7 that are not quite up to the task of driving many of the common full-size cans.
For many people though, they see a design like the o2, and they like it, but would like it just a bit better. This is why most of the bulk of better amps are in the $250 and above range. If you add a nicer case, perhaps a nicer looking and feeling volume pot and switches, perhaps a couple of inputs and a loop out, plus you are a company that has to go through even this minimal re-design, plus choose parts that are reliably available, assemble the device, test it, ship it, and provide a warranty on it, it's easy to see why $100 in 'parts' can become a $500 amp. This is where most of the market is at.
Above that level, you are starting to pay for extremely nice case-work, esoteric parts that don't measurably improve the sound, but are nicer to look at and use, and/or additional features. Also, if you think about it from the point of view of a manufacturer, why make a $200 amp that is up to the task of doing everything, when instead you can sell products at $200, $1000, $2500 and so on? There are people willing to buy at every price point, why not serve them?
Edit: I see that Shike said pretty much what I did in many fewer words. 
Edited by zhenya - 1/15/12 at 3:41am