What exactly is a Niche anyways? The term niche when it comes to making money online is not an exact science. The vast size of the internet has made the term fairly hard to define.
In general as to internet marketing or web sites a niche is a smaller subset of a particular market that is more easily targetable. The question is where do you draw the line. I mean realistically an entire market could really be a subset of another market so that could technically be a niche as well. The point is that a niche is defined to the degree you want to define it. You can have a small niche or a large niche. Some will concentrate on micro niches. Which means there is just about no specific topic that can't be broken down further.
For instance, if you picked a topic like skiing, that could be a market but it could also be a niche in the outdoor sports market or winter sports market, which in itself is a subset of the sports market. But take it down further and you can say skiing could be broke down into locations like aspen skiing or mountain skiing or whatever you like. So in reality when talking about niches it is truly up to the person that is creating the site or blog that they are targeting. The smaller the subset of an individual market the easier it is to break into that market.
The purpose of choosing a small niche is to provide an area in a market where "you" can provide more expertise than someone else. You can become the authority in that area. The only problem with that is if you pick an area that is too small, you are limiting or at least making it harder to create content for your site. If you are the king of your backyard it might not bring that much attention to others. Your goal should be to be able to get enough visitors to your sites as possible which in turn will lead to making money from your site or sites. If you are the pawn in your neighborhood, you have more potential traffic but most people will only listen or follow the king. This is why its harder to choose a more broad niche or attack a market in the whole.
When doing niche sites you can start small and grow to the full market or you can attack the market full on but end up growing much slower. It really depends on if you need to make money right away or not. It will take much more effort and time to start in a large market but the rewards could be larger. If you want to get to a faster dollar then the king of your backyard approach might work best. Of course finding somewhere in the middle is always a viable option and doesn't limit you as much as starting extremely small.
The pages I will be posting in this area should be able to help decide what direction you want to head. Be a big fish in a small market or slowly become the whale in the entire sea. Anything is possible if you have enough desire.