The iPhone is a fun toy, really, but yes it is expensive due to the lack of competition (AT&T only, still, more than 2 years after its release). The main pull of the iPhone is the huge number of applications available for it, quite a few of which are very useful. I do find that the screen is too small to be very useful for browsing the internet, however, and so it’s of limited usefulness for one of the core uses of a computer.

I think right now we’re in a place where the laptops are still too big to be superportable (and the netbooks have limited functionality), while the cell phones are too small to be useful for core computing functions, regardless of their processing power. That would point towards the need for an intermediate device. The netbooks are trying to serve that niche, but not doing it terribly well, I think.