Anything that has decent layout and style features will cost about as much as Pages, or more.
If you are only interested in a good writing tool there are several; however iA Writer is the only one that springs to mind ($4.99). I have Essay, which will allow some basic text styles via Markup. Good for making notes and basic documents, but not massive articles.
Your other, completely free, option is Google Docs. The tablet optimized site is basic, but you can switch to the desktop site for more control (though less ease of use). Accessed via Safari, so you'll need a Google account and internet access to use it.
Personally I think Pages is worth the price. And they just made it universal so that it works on the iPhone and iPad for no extra charge. That and the ability to create folders for you documents are welcome additions to the app.