« A Pocket Studio/midi controller...oh yeah, its a phone too »

The absolute best things about the Iphone's in general are the apps. With the touch interface and networking abilities, you can do unbelievable things with this device. Ok, back to the Apps. If you are a musician and you like to write your own compositions, then you have to have Nanostudio or MusicStudio. Both are sufficient and give you the ability to multitrack a fairly large built in library of instruments and with some effects too (certainly more limited than the instuments). Although the screen is small, you will be surprised at how easy it is to use these programs and you will be very happy with the results. Other amazing apps allow you to control pretty much all of you computer's parameters. One app called AC-7 allows you to control your DAW (Logic 9 and Ableton 8 in my case) with amazing ease. Now I can sit at my drum set in another room and control my recording software. No more running back and forth in between takes, LOVIN IT! Another app called Touch OSC lets you customize as many layouts and midi controls that you mind can come up with. This app makes using Ableton Live a loopers dream come true. No longer am I bound to my computer screen during performances. Hell, you can sit at the bar and control your show from there if you wanted (makes for some interesting intros). There are so many other great apps that I can't fit them in this box. The point is that Apple has made an amazing device that can do things that only Star Trek could do and it fits into your pocket and it works as a phone and so much more!
What I don't Like. My $80 bill a month from AT&T. Although I don't like that Apple restricts its services to AT&T, its more AT&T's fault for the negative of this device. I would imagine that the next Ipod will follow the Iphone 4 design, so if you can wait, that would be a good idea. I would also recommend the 3gs but the screen resolution on the 4 is really worth the extra money.
When it comes to instruments and the DAW apps, the sound coming out of this guy is very impressive. Certainly not as good as I have coming out of my Macbook, but its amazing none the less. The cool thing I should mention is whatever you write on the iphone in most of the DAW apps can be bounced as midi files so you can use other devices to get the end product. Very nice.
This is my first Smart Phone. I checked out the Droid but I knew the Iphone 4 would be a better choice as I use all macintosh in my studio. I would definitely make the same choice again.