I love mine. I bought it just to have the Internet with me everywhere. It turned out to be cheaper per month than having anything else so it beat out a UMPC I was considering.
The screen turned out to be just as awesome as I had hoped. As Al4x mentioned, the sound quality could be better. The stupid sunken headphone jack was irritating at first, but Shure makes an adapter with a mic so you can use any phones with it for music listening and making calls.
My music collection is on my Mac so I sync my iPhone with it. I find it almost too easy. You plug the phone in, it syncs your music, movies, pictures, contacts, and bookmarks in minutes, and you go.
If you can deal with the two year contract with A.T.&T., then get it. I was leary about that in case I needed to get a UMPC later. If the iPhone had copy/paste it would be perfect.
I did just order the Sony UMPC since I did need a Windows PC with me and I found out that I can use it with the iPhone's SIM card and get 3G speeds on the Internet. Don't let everyone complaining about the speed of the EDGE network stop you either. With a good connection you get usable speeds. I think most of the complainers have just been spoiled by broadband.