Although there are hundreds of Linux distros, I still see some unpopulated and underpopulated niches.  The ones I see are:
1.  Lightweight user-friendly distros with large repositories: This is the niche I'm aiming for with Swift Linux.  In the past, I tried to make antiX Linux more like Linux Mint and Puppy Linux.  Future versions will be a lighter version of Linux Mint Debian Edition that fits onto a CD.  My idea is to combine the superior capabilities of Linux Mint with the superior speed and compactness of Puppy Linux and antiX Linux.  With the end of Windows XP support approaching, the controversies over Unity and GNOME 3, and Ubuntu as heavy as Windows, I see an unprecedented opportunity for lightweight distros.  I know Lubuntu is considered lightweight, but it will be hard for it to remain lightweight given that Ubuntu keeps growing bigger.
2.  Lightweight distros: DistroWatch lists only 18 distros for old computers out of 312 active distros.
3.  Lightweight distros that fully support languages other than English: I've thought about how Linux can bridge the digital divide.  Bridging the digital divide here in the US is relatively easy, because English is the primary language in most places.  Bridging the digital divide around the world is another matter, because not everyone uses English.  A lightweight distro that fully supports languages other than English would go a long way towards bridging the digital divide in other countries.  A lightweight distro that fully supports Spanish would bring computing to much of Latin America.  Since the Latin American countries are poorer than the US, not many people there can afford new computers or even 4-year-old computers.  It's a pity that pirated Windows is so popular in other countries.  Of course, Microsoft would rather have people break the law and use pirated Windows than comply with the law ad use Linux.
4.  Arch Linux derivatives: For such a popular distro (one of the DistroWatch Top 10), it has very few derivatives.  DistroWatch lists only 7 Arch Linux derivatives but 77 Ubuntu derivatives, 137 Debian derivatives, and 60 non-Ubuntu Debian derivatives.
5.  Lightweight versions of Fedora, OpenSUSE, PCLinuxOS, CentOS, Mandriva, Sabayon, and other leading distros: I'm surprised that nobody has given any of these popular distros the antiX treatment.  antiX Linux is a lightweight version of MEPIS Linux and proved that it's possible to lighten a heavier distro but retain compatibility with the parent distro's large software repository.

I'm sure there are other niches that could have widespread appeal but are underpopulated.

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Jason Hsu
Founder and lead developer of Swift Linux http://www.swiftlinux.org