I think it's good for them, actually. DD is four. She plays some educational games on the PC at her preschool (outstanding rated, btw, so the inspectors don't think it's bad). She also plays games on my iPhone and uses the CBeebies website a lot at home, eg while I am cooking.
I don't disagree that there should be plenty of running about, baking, dressing up and singing etc in their home and school lives. But I think those that say that the PC/internet cannot be a social activity are wrong. I have watched children at my daughter's preschool playing together on the PC and I think it's teaching them excellent social skills, actually:
They have to share and take turns. Only one person can operate the mouse at a time. I have seen them negotiating turns and it's lovely, and quite impressive (I never get that level of cooperation at home!)
They offer helpful (slightly bossy but hey, they are 3 and 4) comments to the person who is operating the mouse - 'no, that's the biggest' or 'push the green button' etc.
They are really sweet at applauding each other and offering praise when someone completes a task successfully.
They look on it as a shared activity, not an opportunity to do something alone, from what I've seen, and I like it. Computers and the internet are something that every child needs to be really confident with these days. I don't think you can start too early.
As for the internet, I think very few preschool children would find it easy or even possible to access something truly unsuitable. With different users on a PC, it is pretty easy to set it up so there is very little chance of this. DD has her own profile. She knows how to get onto it. It opens on the CBeebies website and she has bookmarks for Poisson Rouge and Boobah Zone. All pretty harmless. And actually, it is helping her reading/spelling skills a treat. She can recognise the button that says PLAY easily now and type in her own name when prompted. She can even type in Mary Poppins on YouTube and bring up a song or two while she sings along.
Basically, YABU. Used sensibly, the internet is a fantastic thing for preschoolers.