We have iPhones at work and they are fantastic; I have to say that it is the most fantastic invention. It's really intuitive and has the benefit of being able to have extra applications added. As it comes, it has:
- Full email
- 3G and WiFi connectivity
- Full web browsing (although not Flash-based sites)
- Camera (only two mega-thingies, but the software makes for great snaps)
- Full iPod... this makes your other MP3 music gadget redundant
- Image library
- Calendar
- Note pad
- Access to 1000s of games and apps
- Google Earth
Can't think of any major downsides