No, it competes with Linode. Having used both, I found Linode vastly superior in every way. (Currently using Linode for rationalwiki.org. Cheap and reliable.)
Big one: it's possible to send a bloody email from a Linode. Rackspace put all their nodes into the various DNSBLs, and offer email as a separate nickel-and-dimed service.
Littler ones: service and quality of service for little problems. I realise we're buying at the low end, where dealing with a customer at all blows that month's hosting fee, but somehow Linode managed way better tech support and customer service.
Bonus: Linode keep doubling what you get at a price point, with no action beyond a reboot on your part.
So if you want low-end hosting, where you do need to keep your own backups just in case, etc. ... I would heartily recommend Linode to anyone.
FYI since RS bought MailGun, they offer each RS customer 50,000 emails per month via Mailgun (though limited to 4-5 domains).
RS seems to be moving to higher minimum service levels tool -- existing plans are grandfathered, but new users will at least have to select a $50/month minimum support plan.