First of all, let me just say that it's one lusty, good looking device. It's as long as a traditional 3.5" PocketPC PDA (e.g. some recent iPaqs), but it's much thinner and less wide (because of its 2:3 screen instead of the PDA's 3:4). Overall, it's definitely a good sized device. Not too big, not too small either. And it's innovative too. Everything seems to work via multi-touch, a touchscreen-based input method (just make sure you stop eating potato chips from now on). The wide screen has a 320x480 resolution, which is the same resolution as some PalmOS PDAs have, and also the same resolution of some high-end Japanese phones. Overall though, the screen resolution is ahead of the curve compared to most smartphones sold today in Europe and US.
iPhone supports WiFi, Bluetooth 2.0+EDR and Quadband GSM/EDGE communications. It is a bit of a let down that iChat/WiFi-based video call is not supported via a front VGA camera, but I am pretty sure that this is a matter of time before it happens on a future (3G) model. The device also has a pretty good battery life, a 2MP camera, and it's surprisingly light at 135gr (most HTC smartphones are over 150 gr). It comes in two flavors of 4 and 8 GBs of flash storage.
What really strikes you though is its interface. Apple has used OSX as the basis of their OS, even if it's not really OSX. You obviously can't run any of your MacOSX apps on the iPhone, so saying that this phone "runs OSX" is not as accurate as saying "runs a mobile, modified and incompatible version of OSX". Regardless, this is one good looking UI they got there. Looking at the flash demos at Apple's site, everything just looks more beautiful than any smartphone out there today. I wouldn't even be surprised if the UI is hardware accelerated with QuartzExtreme using maybe a high-speed Intel XScale ARM CPU and a 16 MB Intel 3D card (same to what the Dell x50v/x51v uses), but I guess we won't know that unless we learn more about the device itself in the future.
Visual VoiceMail and SMS and photo management seem to be very nicely implemented, and the whole iPod-based UI has been massively reworked to look more impressive. Google Maps are included, although there is no real GPS support inside the device (and we don't know if it can be used with a Bluetooth-based GPS device). HTML-based email is a very strong plus, given the fact that very few smartphones actually support HTML email. The WebKit version of Safari is working a lot like Nokia's "minimap", where the user can zoom in and out of a page and focus on where he/she wants to read. While this is a very good feature, it won't be as good as my Dell x50v Opera-based browsing or the Nokia N770/N800 experience, because both of these devices use a higher resolution screen (but they don't have any GSM phone functionality, so things balance out).
There are a few stinky points with device. Steve mentioned nothing about an SDK. Personally, I do not consider a "smartphone" a phone that can't run native applications. I consider it instead a "high end feature phone". And no, I don't consider widgets to be as good as native apps because they don't give you the same level of control and system access as C/C++/ObjC or even a good implementation of Java/C# gives you. And speaking of Java, Steve mentioned nothing of a J2ME implementation on this phone, which means that you might not be able to run any of your games or applications that you are accustomed on any other cellphone (personally, I like Opera Mini, Yahoo! Go and... VideoPoker). And even if widgets are reworked to require less CPU and RAM (which is my main beef with them on my Powerbook), even then, Apple said nothing about actually allowing third party widgets to get installed.
The other stinky point is that of the text input method. Sorry, but I don't buy the current input method at all. As a person who owns over 10 touchscreen devices (from Moto-EZX-Montavista to WinMobile to Nokia to Palm to Zaurus), I know better than anyone that typing characters one by one is the worst thing in the world, even when on a large screen. YES, I did notice that the iPhone is predicting words, but this is not the problem. Instead, the problem is having your thumb trying to be precise when tapping on the keyboard to hit the right key! What Apple should have implemented in addition to their current solution, is something like TenGO, the BEST text input method for touchscreens ever created (which is a solution that can't be implemented as a widget btw as it requires real system access). In fact, if Apple could buy TenGo or implement their technology somehow, that would be an amazing thing and it would take out any possible "touchscreen fears" that people have. But as it is now, I am not happy with it.
Two more problems with device is the tactile feedback; that you don't get when you press a virtual button, and the fact that some usability issues remain (for example, there is no "send via Bluetooth" option when you try to send over an image -- as Steve demonstrated). Also, I saw nothing about MMS support... And what about wireless Stereo Bluetooth support (A2DP/AVRCP), a feature that many new phones support (all the new LG/Samsung ones for example)? And finally, does it have a user-replaceable battery as it is true for all other cellphones?
Rest assured though, most of the problems I mention here will be eventually fixed or added in future models. It's just that I personally I am a bit of a perfectionist --like Apple is too--, and so I will be waiting for a future model before I shed a minimum of $500 to get a new phone. If the iPhone will be sold unlocked and without a contract (I never buy locked phones, it's a matter of principle) there is a good chance that it will cost a minimum of $600 or even $700, and for that money, it better have all my pet peeves fixed.
Overall, I think that this product will sell well though and it will bring many new customers to Cingular/AT&T. It won't displace Nokia or Motorola, but it will find a niche of its own. And remember, being "successful" in the phone market does not mean that Apple must get 80% of that market share just like they currently have with the iPod. In the phone market, having a 5% share means more iPhones sold than iPods! I am confident that Apple not only will achieve this, but it will push the whole smartphone market to take over the plain feature-phone market.
The future is convergence, the future is bright!