Fair enough: your milage does vary. Personally I like my iPad and I tend to use my iPhone less and less.
I like the bigger screen, especially for:
- reading our big company manuals with lots of illustrations. The iPhone's display (while very sharp) is too small for me for long term reading. I can concentrate better when I stare/read on a bigger screen.
- web surfing. It is not only about reading, but also about hitting links. On the iPhone i have to hit links on a microscopic level - and I have big fingers

- games: my wife and me often play games on the iPad and we never do that with the iPhone because it is just too weird to stare/hit things on a small screen
- and yes, for passing around pictures in the family. For example my grandfather would never able to see pictures in clear view on a iPhone. The screen is too small for him. On an iPad it is much easier for older people.
- typing: i HATE typing text messages on my iPhone. My fingers are relatively big and it is much easier for me to type anything on my iPad. I actually find the virtual keyboard on the iPad fantastic.
There is also a lot of educational software for kids on the iPad available. For example, when kids have to press a picture and then the sound and the name of an animal will be audible, etc. I think the iPad is great for that and has the perfect screen size for that.
The iPad is not a necessary device. But I consider it a device which is very nice to have. Just like any other luxury device. Is it a full notebook replacement? My answer would be: sometimes. It really depends on the occasion. For a short trip where you know you just have to access the web and type emails, the iPad is great. On other trips, I rather have my MBP with me.
Again, for some people the iPhone serves that very purpose, too. Not for me. I rather like a bigger (touch) screen estate