Well at the moment as the watchers have said his purpose was fulfilled. That doesn’t mean he is gone. I imagine both Walters are wondering what happened to him. Gotta remember he has seen the future and was about to spill it all. Can’t have that so they made him disappear in front of them.
Just watched the episode. I loved it.
Re-thinking the ending, after reading all these posts, I think this is how it went down:
Peter wasn’t erased from the timeline or anything like that. The watchers forcibly removed him from existence, including everybody’s memories of him. This should cause problems pretty quickly because of how integral he is in everything.
At some point someone had to make the machine. I also assume all those drawings need remade each loop. Paper don’t last forever.
I was under the impression that universes diverged when Walter first looked on the other side. So anything before Peter was (what age? 8ish?) is the same. The alternate universe’s accelerated technology was a response to the wormhole problem. They advanced quicker because - had they not - they’d be dead. It’s also why there was no attack on September 11th 2001: The geopolitical situation is entirely different there from 198x on.
No, the universes had diverged far before that. They were using zeppelins in the 1980s over there, their technology was ahead of ours (they had digital cell phones in 1985) and that sort of thing, all before Walter ever went over.
And the 9/11 attack did happen over there; they just didn’t get the towers. The White House was destroyed in the attack instead.
Looking back at the episode Walternate says something to the effect of needing to build the machine himself and sending it back through the wormhole, so that is apparently where it is supposed to have come from. Still doesn’t explain where the idea for the machine originated since he would simply be rebuilding something he had already seen at that point.
I always assumed “observer” was used in the quantum mechanical sense, which says that you can’t observe something without affecting it. (Pretty much made clear in the episode Peter) As said in The story of Schroedinger’s cat (an epic poem)
Shine light on electrons — you’ll cause them to swerve.
The act of observing disturbs the observed —
Which ruins your test. But then if there’s no testing
To see if a particle’s moving or resting
Why try to conjecture? Pure useless endeavor!
We know probability — certainty, never.’
really interesting theory below -
pretty sweet - IMHO…and could be a pretty nice way of bringing back Peter
Here’s a short video where the Producers explain a bit the repercussions of this seasons finale:
http://www.youtube.com/watch?v=8kY2l8ywXgE&feature=player_embedded
Reminds me of: “All this has happened before. All this will happen again.” 
BTW, Seth Gabel (Lincoln) will be a series regular next season. I hope more in his Redverse version. 
And evidently, we’ll be seeing more of the “bridge”…a lot more…
I know that series bosses Jeff Pinkner and J.H. Wyman gave fans plenty to chew on — first with Friday’s season finale, and immediately afterward with their TVLine “debriefing.” But one vittle I saved has to do with the nature of the “bridge” that Peter created to connect the two universes (as opposed to destroying them). Wyman told me that moving forward, that room inside the Statue of Liberty will serve as “sort of an airlock” via which VIPs can cross to and fro. “You go out one door and you’re in our universe; you go out the other door and you’re in theirs,” he explained. But despite its location within a landmark, this “bridge” won’t be getting added to any NYC tourist maps. “No,” Wyman confirms with a laugh. “It will be a well-kept secret.”
http://www.tvline.com/2011/05/matts-inside-line-scoop-ncis-fringe-cougar-town-community/
EDIT - We also may be going back to the future - tho maybe not the same one - Certain events, though, may be destined to unfold, like the Trial of Walter and whatever happened on Detroit that Peter referenced
FringeBloggers has a funny article about the head-scratchers from the finale.
here is one of my favorite quotes: 
Q. OK, so Walter was the one who invented the First People Machine?
We don’t know for sure. It’s a possibility. It’s worth mentioning that Walternate’s version was based on William Bell’s design.
Q. But he sent it back, he MUST have invented it!
Not necessarily. He sent it back in an iteration of the time-loop, but we don’t know where it ‘originally’ came from – kinda like Nielsen boxes.
Thought this was interesting…
New Mexico. giggle Area 51. hehe.
I never really looked at the interiors of the map on the show. Surprised to see how different the US developed in their universe.
I do wonder what happened to California. It’s not just a sea level rise because that would have changed the rest of the coastlines as well, not to mention have had a visible effect on the other side’s New York Harbor.
When I get stuck when thinking about time, dimensions and paradoxes I just remember…
“People assume that time is a strict progression of cause to effect, but actually from a non-linear, non-subjective viewpoint - it’s more like a big ball of wibbly wobbly… time-y wimey… stuff.” - The Doctor
I presumed that’s the line of the San Andreas fault.
North/South Dakota and North/South Carolina becoming just Dakota and Carolina I get. West Virginia and Virginia becoming the District of Virginia (with no District of Columbia?) I get. But how do Oklahoma and Kansas become “Midland”?
And we lost the UP of Michigan somewhere along the line. But we have “Southern British Columbia”.
Then there’s “Independent Nevada” and “Louisiana Territory”.
What surprised me was north/south Texas. From my visits to Texas, it seems more like they’d split it East/West, where the elevation (and climate) changes.
The San Andreas goes further west the farther north you go, so it’s not quite right. They never went into it online either. That part could still be part of Mexico. Or there could have been a big enough quake to make the place uninhabitable - but even a 10 magnitude wouldn’t make it fall into the ocean entirely. Or in this universe, that’s the acual coastline. or Walternate f-ed it up., or…etc.
This would also only give the US 48 states I think, not 50…and thats if you include Alaska and Hawaii…maybe Purrto Rico is a state? Or Guam?
Love the other differnces too - JFK is still alive and an ambassador, Nixon is ona coin (so maybe watergate didnt happen), MLK is on a twenty, Death of Batman (Death of Superman in our world), Red Lantern & Red Arrow (Green Lantern and Green Arrow in our world) - and more http://blastr.com/2011/01/83-differences-between-fr.php
Wouldnt mind seeing a little more comparitive info next season. Did we still go into Iraq? Did we go into Vietnam? Did we kill OBL on that side as well?
Is the porn just as good over there?
Here are more details about the variations of the map: http://www.fringetelevision.com/2010/05/united-states-of-fringe-map-from-over.html
I like the theories the actors offer us for season 4.
Here are some more OSSIM clips: http://www.fringebloggers.com/an-evening-with-fringe-video-highlights-interviews/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fringebloggers+(FRINGE+BLOGGERS+-+Blog+Fansite+for+FOX+Show+FRINGE+from+JJ.+ABRAMS)
And
http://www.fringebloggers.com/will-there-be-emmy-love-for-fringe-anna-torv-doesnt-rule-it-out/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fringebloggers+(FRINGE+BLOGGERS+-+Blog+Fansite+for+FOX+Show+FRINGE+from+JJ.+ABRAMS)
Ok Fringies. I downloaded the audio of the Fringe panel which was held this week in NY. But since the volume was so low, I edited it with Audacity. Now you can understand John Noble and Anna Torv, but beware to tune your volume down, when the audience applauds. I’ve uploaded it here and it as some funny stories, like the most embarrassing moment John Noble had on set. It involved Anna Torv and Jasika Nicole.
Enjoy!