I held off on picking up a new phone to see what Apple would announce. Indeed a slick product. The suggestion that Apple is all about style over substance is wrong: the key to the success of the product line is useability. The Apple line is just better to use, almost to a product, than competitors. True to form, prices will be very high and its not clear that the useability features in the iPhone are sufficient to differentiate it from other cheaper products in a crowded market -- though it may be premature to call it an "iFlop" as some have suggested. In the short run, I'm picking up a Blackjack from Cingular: this will likely lock me out of an upgrade to the iPhone at a reasonable cost, another factor Apple will need to contend with.
The interesting question is whether this signals the end of the iPod-as-standalone music-player as a viable product. Only time will tell. From a consumer perspective, this should put a good deal of pressure on other device manufacturers to work on useability issues, which will be a welcome change.