It's inexpensive because it's a standard LED light design for bicycles and head-mounted uses (caves, mining, nighttime work outdoors, etc). It uses a single inexpensive CREE LED to power it and is made in fantastically high volume for sale on Ebay, Amazon, and wholesale/bulk via Alibaba and elsewhere. We're talking tens of millions of headlights per year.
The design and materials are just fine. Ditto for the battery. The only issues that people seem to have with these lights are:
1) Their beam isn't optimized for a bicycle headlight lighting pattern and is more likely to blind drivers, pedestrians, and other road users (you can buy a corrective lens on Ebay for these single-LED lamps that fixes this issue)
2) the barrel jack connector cable(s) that lead from the battery to the headlamp will disconnect after a lot of use/wire bending/disconnect-reconnect cycles. The solution is to buy a new battery or lamp or simply to make sure that the cables/connector never get bent or stretched.
But overall, the headlight is not "too good to be true". Interestingly enough, one of the top-selling cycling lights sold on Amazon is a ~$45 version of this headlamp, with one of the only differences being that it's more expensive and offers a warranty (that no one will ever bother to use!), therefore customers trust it more, even though it's a product that is largely equivalent to the ~$10 version. Seems strange to me, but if there are people who would rather pay $45 for a $10 headlight, who am I to stop them? ;-)
~$45 verison:
http://www.amazon.com/gp/product/B00GJZ015Y/
$10 version:
http://www.amazon.com/gp/product/B008KUXRAW/