What are the License Terms?
It's pretty clearly was created in response to the similar (but smaller) "just enough OS" versions of Linux that have been around for a while which are intended for use in packaged cloud or VM applications. For these, you only include the minimum of stuff necessary to make a specific application work.
Windows Nano sounds like it would be best suited if software vendors bundled it as part of their application for installation into a VM. That is, you buy (license) the software from vendor 'x', and it comes with Windows Nano included in the virtual machine image, along with just the dependencies needed to run that application. This would put the app dependencies issue back on the software vendor, rather than on the customer. Whether or not this can happen will depend of course on Microsoft's licensing terms and conditions.
The lack of features (including a fully functional shell) may be intentional, as Microsoft may wish to severely limit what can be done with Windows Nano to ensure that it doesn't cannibalize too much revenue from traditional forms of Windows. On the other hand, they may simply be bumping up against having painted themselves into a corner by putting all their eggs into the DotNet basket for the past decade. The corresponding stuff in Linux tends to be written in C, Python, Perl, or Ruby, and those languages are quite happy on trimmed down Linux systems.
"There is no IIS (Microsoft’s web server) on Nano Server, but it will support ASP.NET 5.0, as well as (according to Microsoft) PHP, Nginx, Pytho 3.5, Node.js, Go, MySQL, Java in its OpenJDK guise, Ruby 2.1.5 and the SQLite local database."
Looking at that software list, aside from ASP DotNet it's all stuff ported over from Linux, and supposedly even ASP DotNet will be running on Linux some time in the future. They're not giving customers a lot of reasons to run Windows. If vendors package the OS in a VM image with their software (see the first paragraph), then those vendors will be looking at which is cheaper and how to bargain for price cuts. I can't see that idea being too popular with Microsoft. It's possible they may be working on an IIS and MS SQL Server versions which will run on this in order to satisfy the customer base that is locked-in to them to give them a reason to not simply port to Linux for this market and be done with it.
Overall it's an interesting idea, but success will depend on a lot of factors which aren't apparent yet.