In a word, functionality and integration. OK, that's two words.
Any number of reviewers have commented that there are other phones with the same, even more, features. Heck, even my Treo 650 matched the feature list, except for GPS.
But functionality is more than features - and this applies to ALL products, not just phones or Apple stuff. Once upon a time I designed advanced RF test equipment. We had to construct a user interface simple enough for the salesman to demo, yet powerful enough to do what a real working engineer would expect. It's not easy.
Put down your matrix of competition, your bullet lists, and pick up your product. Does it work?
Put yourself in the shoes of your real-world customer: can you use this thing in the field? I once saw a product intended to be mounted up in the air, on a pole. It weighed about ten pounds. It took two people to attach the device to a pole. Two people do not fit in a bucket truck, folks.
Back to iPhone: one of the reasons it works so well is the seamless integration with all the apps on the Mac - address book, calendar, etc. I just dock the thing at night and I'm done.
Is it perfect? Not quite. More on that in another post.