Regardless of whether I think that the Apple processor switch will be beneficial to Apple, Linux-on-the-desktop does not look as favorable anymore. Please note that I am talking about Linux on the desktop, as I don't see the Linux server business declining -- Apple will have no effect on the server Linux. Here are a few thoughts:
Usually there are two players rather than three: the favorite and the underdog. The "third" person does not matter as much. With Apple moving to x86 it can quickly become the underdog of the platform and put Linux in third (outsider) place.
Apple mentioned that Mac OS X will require Apple PCs, but you will be able to run Linux/Windows on them just fine. This is a huge advantage for Apple rather than for Linux or Windows. It brings over these last few potential customers who also needed Windows but didn't want two computers or commercial emulation. Apple can sell more Apple PCs when the customer knows that this is a normal x86 that can also run native Windows, because it allows the customer to think that "oh, well, if I don't like OSX, I can always run Windows". It gives customers a choice even if Apple won't sell Windows bundled with its PCs, or "support" Windows on its hardware.
With Mac OS X's great desktop experience, why would anyone use X11 and its DEs? They are known to be rather "disconnected" from the underpinnings of the underlying OS, making the desktop Linux experience worse that it should be. For example, OSX just "works with the hardware" rather than "Gnome/KDE working on TOP of a kernel". There is a disconnection of all X11 DEs and how well they "wrap" the experience and the underlying hardware. There is no cohesion.
Someone could argue that "Linux will have no problems with Apple PCs because there is already Linux on Apple machines today." While true, this is completely beside the point. PPC Linux is only a blip on the screen compared to the larger Linux movement, and making a commitment to PPC Linux means making a commitment to a niche hardware platform. x86 Macs will run the mainstream versions of Linux without modification, and once Linux users start making the switch to OSX, their favorite Linux apps will become increasingly more available on OSX, initially through Apple's X11, but eventually in a more integrated fashion.
The percentage of Mac users using a Linux on PPC is way lower than the percentage of x86 users also using Linux. For example, 3% of all x86 users use Linux according to some recent stats, but less than 1% of the 3% of the Mac users use Linux (that's 0.33%). With the release of the x86 Apple hardware, there will probably be a jump in Linux-on-Apple use a first, because more than a few Linux users are likely to buy Powerbooks, but it will be interesting to see how many of them stick with Linux once they have a side-by-side comparison with OSX, and all its user-friendly Unixy goodness.
There is the other thing too: I have spoken to a lot of Linux users in my time and most of them say "ah, yeah, the Macs are nice, but I can't afford one". With Apple able to provide well-priced x86 Macs AND giving the re-assurance to these users that can also run x86 Linux there, it makes them way more likely not only to buy an Apple PC as their next upgrade, but perhaps eventually to ditch Linux altogether! So, it's not only that the Linux adoption might see a decline, but I expect many current Linux dekstop users will move full time to OSX.
Yesterday I mentioned that Microsoft will probably help Mac OS X on the x86. Quoting myself: "...Apple coming to x86 is not bad business for Microsoft initially in terms of "fighting together" Linux. Microsoft has failed to squash the Linux hype but users who go Mac OS X almost never look back. With Apple managing to squash Linux in the x86-64 market, Microsoft will have to fight Apple at a much later future date. And it will be easier for Microsoft to fight an 'enemy' that plays with the same rules as they are rather one that doesn't (open source). My enemy's enemy is my friend, kind of thing... This is a lot like you are getting beaten at both the club and the school, but you give your lunch money to the bully at the club guy to come and beat the school guy. At the end, you end up with ONE bully instead of two and that's progress..."
On the other hand, Linux has two very strong cards to play:
1. Linux is strong overseas as it's cheaper to acquire. Developing countries will take Linux on a cheapo PC anyitme over an Apple PC or even a Dell with XP on it.
2. Apple's transition to x86 might spread a newfound desire for people to try out alternatives more openly and so Linux will also get an advantage.
3. There are many people in the industry who are idealists, and even though they might even buy an Apple Powerbook because of its industrial design, they will insist on Linux or FreeBSD for ideological reasons. Mac OS X, for all its open source underpinnings, is still a closed platform, and will remain so. It will never be Free-as-in-speech enough for the GNU crowd.
However, it all depends on how well Apple does on this new platform and how competitive its pricing is. If Apple does well, desktop Linux will have a hard time keeping the same growth curve it has now. No, Linux will never die; in fact, its server business will continue to grow immensely. It might even evolve into something else in the future, but Linux will never 'die'. It's open code and open code does not die. But it can be contained enough away from full scale desktop success, enough to let Microsoft sleep tight at night. And Apple can definitely help the 'cause'.