I've used Macs for 25 years and have owned literally hundreds of Apple products. I generally think the world of Apple and its leadership. If you think about how much better computers and consumer electronics have gotten just from other companies trying to imitate Apple, you'll begin to understand the true impact of Apple's legacy.
Having said that ...
I switched to a Nexus One in January, partially expecting to be disappointed and return to my iPhone. Well, I kept the N1, because it's fantastic and remarkably useful, with Android providing the power and flexibility to improve my productivity and my knowledge, both of my own little world, and the big bad world beyond.
Interestingly, the limitations imposed by Apple on iOS devices and developers created an opportunity for Android to siphon off users like me: Advanced early adopters. iOS is engineered to be too simple in order to not confuse less-advanced users, which makes more advanced users wanting for more.
Home screen functionality is a good example of the contrasting operating system philosophies:
For all of their innovating, Apple has yet to move beyond the exact same mobile interface and paradigm it created for their Newton devices in the late 80s and early 90s. A grid of icons, with favorites in a dock below? That's it? Really? You can do no better than this, two decades and hundreds of millions of R&D later?
Well, yes, you can. Or actually, *they* can, and have. Android's widgets, advanced shortcuts (direct dial, music playlists, system toggles), and yes, even live wallpapers, improve the user's level of information and engagement with their device. Plus, with a more unrestricted application marketplace, developers can (and have!) replaced the stock Android bits with even more functional and flexible replacements. (Launcher Pro is an excellent example.)
Jobs and Apple either don't trust their developer community, their users, or their own operating system enough to offers users this kind of flexibility.
Plus, Jobs can be remarkably stubborn about obvious problems with his products. Control-clicking? How dumb is that? A second mouse button for contextual menus and options is simply the right way to do things, even if MS had it first. I should not have to use a second hand to easily do what I can with just one. For anything.
Another example is the virtual keyboard on the iPad and iPhone. Not displaying lower-case letters on the keycaps when in lower-case mode is unnecessarily confusing, especially when entering passwords. One advantage of a virtual keyboard is soft keycaps. Show us exactly what we're going to type. As Robin Williams (not that one) put it in the title of his book more than 15 years ago, "The Mac is Not a Typewriter!"
Another example is the iPod music player in iOS, which has stubbornly retained the same interface (and problems) for years. To not offer the same player functionality in both portrait and landscape modes is inexcusable. On iOS, I need to rotate my player into portrait mode just to skip to the next song. Dumb. Just dumb.
Jobs knows very well the threat posed by Android. His derisive comments in January were intentionally timed and highly strategic, though his analysis of the fragmentation of the Android installed base and the shortcomings of the completely unrestricted Android Market correctly identified two problems with the platform.
In the end, we should be glad Apple has at least one viable, smart, hungry competitor. Two bright bulbs can light a whole room.